Below are our submission comments on the two tax-related recommendations that New Zealand should:
- Negotiate taxation arrangements with other countries that allow more efficient temporary transfer of employees between New Zealand and those countries; and
- Promote – and participate in – international forums with the aim of reducing the ability of multinational firms providing digital services to shift their profits across national borders to avoid paying tax.
The interaction of domestic tax rules and Double Tax Agreements (“DTAs”) with employee transfer arrangements creates compliance and tax costs which inhibit the free movement of people. New Zealand should consider unilateral as well as bilateral changes to its tax policy and compliance settings to reduce those costs.
It is unclear to us that base erosion and profit shifting (“BEPS”) contributes to productivity problems (such as poor quality of service and higher costs) in the New Zealand digital services sector. It is further unclear that implementing recommendations to address BEPS issues will solve those productivity concerns, if in fact productivity is a problem. The Commission should therefore confirm that it has identified a real issue before proceeding with the second recommendation.