New Zealand's Labour party informed that, in order to fight against tax avoidance of multinational companies, it aims to introduce a diverted profits tax (DPT) which would collect an extra $600 million from multinationals over three years.
Labour’s Revenue Spokesperson Michael Wood informed that the penalty tax would likely be higher than the corporate rate of 28 per cent. This would be similar to the UK where, a diverted profit tax was set at 25 per cent, compared with company tax of 20 per cent. He said: “Similar to what we’ve seen in the UK, you don’t necessarily get the money coming in through the DPT, but it creates a behavior change and you get companies paying through standard company tax.”
Labour Leader Andrew Little noted that “the experience [with a DPT] in the United Kingdom has been positive, as companies such as Amazon are now booking their profits in the UK rather than in the tax haven Luxembourg."
However, a Cabinet Paper from the offices of the Minister of Finance and Minister of Revenue, published in November 2016 explains that the DPT will only target a ‘minority of aggressive multinationals’. The paper further elaborates why the Government hasn’t included a DPT during their tax law changes.
In response, Labor’s Revenue Spokesperson Michael Wood said the comments in this Cabinet paper are “pathetic” and “indicative of the Government’s weak approach”.
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