The Inland Revenue has published an officials' issues paper seeking feedback about whether and how New Zealand should participate in an OECD/G20 tax measure aimed at base erosion and profit shifting by large multinational enterprises.

Also known as the GloBE (Global Anti-Base Erosion) rules, the measure would impose a minimum 15% tax on the excess income of multinational enterprises in every country in which they operate.

Excess income is income in excess of a routine return on tangible investment and employee costs. The proposal is the main part of the OECD’s Pillar Two stream of work.

In CA ANZ’s views:

• It is concerned that New Zealand’s lack of a capital gains tax gives rise to possible disadvantages for New Zealand based companies generally, and contrary to current New Zealand tax policy, although the revised rules include some mitigations.
• Any tax paid under the GloBE rules should give rise to imputation credits.
• A domestic minimum top-up should be progressed.
• The rules should be brought into New Zealand law by way of repetition into existing legislation, and
• Officials should continue to work with the OECD to develop thresholds and safe harbours to minimise compliance costs for New Zealand businesses below the threshold.