IRD sets sights on multinationals shifting profits overseas to reduce tax

The government is looking at closing a tax loophole that allows large multinational companies to reduce the tax they pay in this country by shifting profits overseas.

The tax reducing practice, known in tax circles as a hybrid mismatch arrangement, is the subject of a discussion document released by Inland Revenue.

It proposes that this country adopt OECD recommendations which would remove the advantages of using such arrangements.

“The government considers that New Zealand’s rules on hybrids can be stronger,” Revenue Minister Michael Woodhouse said.

“Hybrid mismatch arrangements are one of the base erosion and profit shifting strategies used by multinationals to exploit the difference between how two countries might treat a cross-border transaction, resulting in less tax,” he said.

“It is important that our rules complement those of other countries, particularly Australia and the UK who have both announced their intentions to adopt the OECD recommendations in this area.”

Submissions on IRD’s proposals close on 17 October.

To read the full discussion document click on the following link:

PDF icon2016-dd-hybrids-mismatch.pdf