Tax

Multinational Tax

For our tax system to have integrity, everyone needs to pay their fair share. Increasingly, New Zealanders are concerned that some large multinational companies are using aggressive tax practices to avoid their obligations to our country. The government has estimated that $300 million of revenue per year is being forgone, while the Tax Justice Network puts the figure at over $500 million.

Labour will take strong action to ensure that multinational companies pay a fair share of tax, based on their genuine activities in New Zealand.

At the international level we support the OECD’s Base Erosion and Profit Shifting (BEPS) programme of work.

At the bi-lateral level, we will review our tax treaties to identify areas in which new technology or business practices may have resulted in tax shifting out of New Zealand, and where appropriate will work with our international partners to resolve these issues.

Labour will collect an extra $200m per year from multinationals currently avoiding their New Zealand tax obligations by resourcing IRD with an additional $30m per year to crack down on multinational tax avoidance.

If multinationals aren’t prepared to pay their fair share, Labour will introduce a diverted profits tax, to enable New Zealand tax authorities to impose tax at a penalty rate if they believe that tax has been deliberately avoided.

Reducing Incentives for Speculation

Our current tax system taxes some forms of income but not others, and creates incentives for some forms of investment, particularly housing speculation. This results in unfairness between taxpayers, and it enables some to avoid paying their fair share of tax. New Zealand is one of only three OECD countries that does not have some form of tax on capital gains.

This situation has contributed to the current housing crisis, and the lowest home ownership rate in 66 years. Housing affordability has become a critical issue for many New Zealanders. Rising house prices are being driven by a variety of factors, including tax rules that favour investment in housing and discourage investment in other activities.

As a first step Labour will minimise the tax benefits that can be gained through speculation on houses. Labour will remove the current loophole that allows losses from rental properties to reduce the taxation paid on other sources of income for which the landlord is liable (so-called ‘negative gearing’).

Labour will also extend the ‘bright line test’ that taxes the profits made on the sale of properties other than the family home from two years to five years. This was the original recommendation of the Treasury that was ignored by National and will capture more people who are flipping investment properties for capital gain.