Government to crack down on multinational companies dodging tax

The government has introduced legislation to parliament that will stop multinational companies avoiding tax by shifting profits offshore.

The bill will be given its first reading on Tuesday next week.

"Some multinationals use aggressive strategies to pay little or no tax anywhere in the world," Revenue Minister Stuart Nash said.

"This is known as base erosion profit shifting and is a massive problem - it denies a country its taxation revenue and erodes confidence in the fairness of the tax system."

Stopping multinationals avoiding tax was part of the coalition agreement between Labour and NZ First.

Measures in the bill will prevent multinationals from gaining a tax advantage through:

* Artificially high interest rates on loans from related parties to shift profits out of New Zealand

* Hybrid mismatch arrangements that exploit differences between countries' tax rules

* Artificial arrangements to avoid having a taxable presence in New Zealand

* Related-party transactions to shift profits to offshore group members.

"The proposed new rules will be an effective response to current avoidance techniques, but are not the end of the story," Mr Nash said.

"The Government will continue to investigate further options, both legislative and administrative, to counter aggressive tax practices."

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