The OECD set out final recommendations from the first half of its tax reform programme to tackle Base Erosion and Profit Shifting (BEPS) yesterday.
PwC New Zealand Tax and Private Business Leader Geof Nightingale says, “The BEPS project marks the most significant change to international tax in modern times. This announcement will have a big impact on global companies, whether through greater compliance demands or impacting how they are structured.
“The impact on businesses will depend partly on how the rules are implemented by tax authorities across the world. With New Zealand's robust international tax and transfer pricing rules in place, we're already well positioned to address BEPS concerns. We do not anticipate any wholesale changes to New Zealand's tax system in response to the BEPS project and it is also unlikely that New Zealand will take any unilateral action in response to the BEPS concerns.
“New Zealand businesses may feel the impacts of the BEPS project through global tax authorities showing an increased interest and scrutiny of global business models and offshore transactions. New Zealand based businesses operating in the global market should ensure that they have access to adequate systems, information and documentation to respond to these requests in future.
“The OECD's recommendations on country by country reporting won't come as surprise to global companies. The big worry for businesses is that different tax authorities will require different information, which could add to the administrative and cost burden for businesses. Efforts to coordinate how tax authorities respond will be challenging but crucial.
“While the importance of today's milestone should not be underestimated, the success of the BEPS project will depend on cooperation between governments and tax authorities across the globe. The next part of the BEPS project is likely to be more controversial, with different tax authorities likely to have different views on what's acceptable and what's not,” concludes Mr Nightingale.