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IRD urged to lift veil of secrecy over big company tax

city_commercial.jpgInland Revenue is under pressure from Labour and a top academic to lift its veil of secrecy on big company tax matters.

Labour revenue spokesman Stuart Nash said experts believed New Zealand was missing out on $1 billion to $7b of tax.

But it was "almost impossible" for Inland Revenue to assure the public that issues were being addressed appropriately without providing specifics of individual companies' practices, he said.

Inland Revenue has declined to explain the implications of a $36 million tax settlement with Australian publishing company APN News & Media that was agreed on Friday.

Inland Revenue also stonewalled on concerns – denied by Vodafone NZ – that Vodafone may have reduced its New Zealand tax bill by paying excessive interest on debts to its British parent.

It has also refused to provide assurances on Microsoft's decision in 2014 to transfer ownership of its New Zealand subsidiary from the United States to Luxembourg. OECD tax policy director Pascal Saint-Amans said at the time Luxembourg was under "enormous pressure" to clamp down on harmful tax practices, though Microsoft denied its move was tax-related.

In each case Inland Revenue said its hands were tied by "taxpayer secrecy".

But Nash said a law change in 2012 meant Inland Revenue could and should get into the specifics of each of the three issues.

Clause 81 (1b) of the Tax Administration Act gave Inland Revenue the ability to comment on individual companies' tax affairs if its commissioner, Naomi Ferguson, considered that was reasonable to support the execution of her duties.

She described one of those duties in a speech in 2014 as "maintaining trust" in the tax system.

Nash said that meant that Inland Revenue could justifiably respond to questions.

"There is no real public interest in knowing what 'Jo Blogs Plumbing' has done. But I would argue there is massive public interest in understanding what Facebook, Vodafone and Google are doing in terms of aggressive tax planning."

Massey University tax expert Deborah Russell backed the call for greater transparency.

She questioned whether there was adequate oversight of decisions such the APN settlement, which was agreed after APN challenged a demand for $64m in tax plus penalties.

"We need to have more information about what they are doing so we can hold them responsible for their actions and so to be sure they are applying the tax law as evenly as possible," Russell said.

"There is a public policy interest in us being able to scrutinise what IRD is doing. If IRD is forgiving tax debts in a sense it is letting people off obligations that the rest of us have."

Russell said Inland Revenue should perhaps exercise its discretion under 81 (1b) "a little bit more".

"That way as citizens we can keep an eye on what they are doing.

"It is not like we are invading an individual's privacy. It is genuinely asking what is going on with these big institutions and companies that are a huge part of our society."

Nash said it was right Inland Revenue was able to enter into tax settlements to avoid long and very expensive court battles. "But ... there should be a level of transparency when people cut deals."

Revenue Minister Michael Woodhouse told a select committee this month that there was more scrutiny on tax matters than in the past.

One of the reasons, he acknowledged, was to do with concerns about the tax practices of multinationals.

But he said that "even he" faced difficulties getting information from Inland Revenue because of the taxpayer-secrecy issue.

Spark chief executive Simon Moutter has railed against multinational tax practices in the media but did not add his voice to calls for more openness.

"I am ... comfortable with the fact that the IRD does not comment on specific issues relating to individual taxpayers or companies, at least until if or when it chooses to file legal proceedings against them," he said.
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