IRD admits it was wrong to withhold submissions on multinational tax reforms

An Ombudsman's investigation into Inland Revenue's refusal to release lobbyists' submissions is continuing despite ...
STUFF

An Ombudsman's investigation into Inland Revenue's refusal to release lobbyists' submissions is continuing despite Inland Revenue admitting fault.

Inland Revenue has admitted it was wrong to refuse an Official Information Act request regarding multinational tax consultations and says it is reviewing its processes around releasing public submissions.

However, the Ombudsman's Office says it was not yet "case closed".

The department refused a request from Stuff in June to release 38 submissions it received in response to two discussion papers on proposed tax-law changes, claiming they were a "tax secret".

Inland Revenue wanted to withhold the submissions until ministers had made final decisions on the law changes, which they did last month when the submissions were released.

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Labour revenue spokesman Michael Wood says ministers "caved in" to lobbyists under blanket of secrecy.
CHRIS SKELTON/STUFF

Labour revenue spokesman Michael Wood says ministers "caved in" to lobbyists under blanket of secrecy.

The submissions showed the Government had made concessions requested by some submitters with an interest in the reforms, including a secretive United States lobby group called the Digital Economy Group whose backers are believed to include the likes of Apple and Amazon.

Inland Revenue's refusal to release lobbyists' submissions before decisions were finalised by ministers resulted in a complaint by Stuff to the Ombudsman's Office, which began an investigation and has been in discussions with the department.

Inland Revenue acting deputy commissioner Emma Grigg said its original refusal to release the submissions was "consistent with our practice".

"However, on further reflection, we now consider that we should have released the relevant public submissions earlier," she said.

Inland Revenue was "currently reviewing our practices around the release of public submissions to ensure there is consistency in the future", she said.

Amazon is believed to be one of the companies represented by the Digital Economy Group, which describes itself as an ...
NOAH BERGER/STUFF

Amazon is believed to be one of the companies represented by the Digital Economy Group, which describes itself as an informal coalition of software, social media and e-commerce firms.

An Ombudsman's Office investigator said Inland Revenue's actions would be taken into account, but its own investigation was still ongoing, with an update likely within a few weeks.

The Digital Economy Group argued in its submission that Inland Revenue's original proposal to tighten the rules that determine whether multinationals are deemed to have a taxable presence in New Zealand were the "most extreme in the world" and out of step with reforms proposed by the OECD.

At issue is the tax treatment of foreign companies that pay subsidiaries or other agents a fee to market their products in New Zealand but which book their sales overseas. Examples have included Apple Computer, Microsoft and Dell Computer.

Revenue Minister Judith Collins denies the final, narrower approach to closing permanent-establishment loopholes will ...
STUFF

Revenue Minister Judith Collins denies the final, narrower approach to closing permanent-establishment loopholes will leave tax inspectors having to make difficult call on multinationals' motivations.

Revenue Minister Judith Collins and Finance Minister Steven Joyce announced last month that the rule change would be revised to "more narrowly target" tax avoidance.

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Labour revenue spokesman Michael Wood questioned how easy that would be, if it meant Inland Revenue had to prove what multinationals' motivations were for the structures they set up.

The Government had "secretly caved in to the demands of multinational tax avoiders" after throwing "an unprecedented blanket of secrecy over the submissions process", he said.

Collins said there was no "blanket of secrecy" as the intention always was to release the submissions "following policy decisions as is standard practice".

Concerns about the original permanent establishment proposals "over-reaching their intended scope" were not confined to a single submission, with "many New Zealand-based submitters" sharing the same concerns, she said.

"The new rule will not require Inland Revenue to consider the motivations of taxpayers. Instead it will be applied in a similar manner to our current general anti-avoidance rule, which involves an objective consideration of the facts," she said.

 - Stuff

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