NZ Firms More Likely To Pay Tax At Home, Survey... | Stuff.co.nz

New Zealand is likely to be bottom of the list in any crackdown on companies moving profits to countries with lower tax rates, according to a survey by Grant Thornton.

The Organisation for Economic Co-operation and Development (OECD) has called for such a crackdown after revelations that giant multinationals were using offshore tax arrangements to minimise taxes.

The survey of more than 3400 businesses in 44 economies found New Zealand businesses were the most reluctant to relocate their businesses overseas in order to enjoy a lower tax rate - some 94 per cent said they were happy to stay. That compared to Georgia (92 per cent), Switzerland (90 per cent), France (88 per cent), Germany (87 per cent) and Ireland (86 per cent). The economies in which the most businesses would move for a lower rate are Russia, India, Taiwan, Greece, Botswana, Norway and Malaysia.

Grant Thornton Auckland partner Murray Brewer said New Zealand stood out on this issue for several reasons including its isolation and average company size.

"Many New Zealand businesses are domestically focused and migration of head office is not commercially viable.

"Also, shifting head office may provide a tax deferral in some cases but the ultimate tax cost for the New Zealand shareholders may in fact increase."

New Zealand tax resident shareholders are subject to tax here on their worldwide income under our international tax rules. Migrating a company head office would have only limited tax advantange unless the shareholders also migrate themselves offshore and become nonresident for New Zealand tax purposes.

Globally, over two-thirds of business leaders (67 per cent) said they would not consider moving abroad for a lower corporate tax rate.

The survey also found more than half of the Kiwi businesses surveyed thought the Government was doing enough on the tax front to ease economic pressure compared to the 33 per cent global average.

Kiwi businesses were more evenly divided on the question of lowering the tax rate against eliminating some tax deductions.

The 48 per cent response in favour of lowering the tax rate was considerably lower than the 68 per cent of global companies that wanted the rate reduced even if it meant eliminating some other tax deductions.

"A tradeoff between tax breaks and headline rates of tax, leading to a simple, low tax rate with no or few deductions, does have the advantage of bringing simplicity.

"The difficulty is that tax breaks are hard to remove once in place, especially in those economies, which are currently struggling to find growth and which use tax breaks to stimulate certain sectors or industries," Brewer said.

The survey also found that the global economic outlook remains highly uncertain with growth rates in and around Europe likely to disappoint over the next year.

Having contracted by 0.4 per cent last year, the eurozone is forecast to expand by just 0.2 per cent this year and the UK by just 1.1 per cent.

Growth rates in emerging economies look healthy by comparison with China's growth rate expected to pick up to 8.2 per cent this year from 7.8 per cent last year, even as the new leadership tries to move the focus from exports and investment towards domestic consumption. Forecast growth rates in southeast Asia and sub-Saharan Africa are 5.8 per cent and 5.7 per cent respectively.

The Grant Thornton International Business Report (IBR) has been surveying European business trends for 21 years and most non-European participants for the past 10 years.

- ? Fairfax NZ News

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Source: http://www.stuff.co.nz/business/industries/8379394/NZ-firms-more-likely-to-pay-tax-at-home

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