Date posted: 2/12/2019

Feedback on the Global Anti-Base Erosion Proposal (“GloBE”) – Pillar Two

The OECD is considering a minimum tax measure to avoid a race to the bottom on corporate taxes. In our submission we raise concerns for New Zealand and our businesses.

Chartered Accountants Australia and New Zealand supports work to prevent a 'race to the bottom' on corporate taxes, however any solution must be practical, simple to administer and comply with, and carry low compliance costs for businesses, whom will ultimately bear the cost of any change. The Pillar Two 'GloBE' proposal expects to affect the behaviour of taxpayers and jurisdictions to avoid a 'race to the bottom' on corporate taxes. It is proposed that the 'GloBE' proposal will operate as a top-up to an agreed fixed rate and will be comprised of an income inclusion rule, undertaxed payments rule, switch-over rule; and a subject to tax rule.

New Zealand is a small, geographically isolated exporting nation. It is not uncommon for New Zealand businesses to have a trans-Tasman parent structure, or subsidiaries in other nations, often the Pacific islands. These rules, if not appropriately targeted are likely to impact a large proportion of our businesses. On a global scale, even our largest businesses are small, and we see a scenario created by the Pillar Two proposals whereby our exporters and our economy are significantly hindered by disproportionate compliance costs. 

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