Tony Joyce analyses the New Zealand Internal Revenue's compliance approach with regard to corporate tax governance.
“I was reasonably blunt. I said I thought Facebook did have an issue in terms of its global tax, with the perception of its tax policy. And I thought he [Mark Zuckerberg] needed to change that.”
– New Zealand Prime Minister John Key at the 2016 APEC Summit
This is a headline no business wants to see. It emphasises the need to effectively manage tax and to be seen as a good corporate tax citizen in the countries you operate in.
Good tax governance is key. Unsurprisingly, this is a significant feature of New Zealand Inland Revenue’s recently released 2015/16 risk focus for business and clearly something it expects Boards to take greater ownership of. This includes Australian companies with New Zealand operations.
For the first time we can recall, both the New Zealand Government and Inland Revenue are encouraging Directors to be more proactive and transparent on tax matters, including making greater public disclosure of their companies’ tax positions. Disclosure of both tax expense for accounting and cash tax paid is recommended, along with an explanation of material differences between the two.
While there is currently no legal requirement in New Zealand for a company to adopt a formal tax charter, or make public disclosure of their tax position (unlike Australia), the likely consequence of business not doing so will be a higher level of Inland Revenue scrutiny and more frequent audit activity.
The goal should be to have a good reputation and a trusted relationship with Inland Revenue to reduce the level of intervention or intrusion that will otherwise occur.
Our observation is that a number of large businesses operating in New Zealand have already recognised the importance of good tax governance and taken steps to ensure tax risk is appropriately managed and reputational risk is minimised. Those that have not should take heed of the message and Inland Revenue’s cautionary guidance.
KPMG in New Zealand can help your organisation navigate this critical issue. If you are unsure where your organisation sits when it comes to tax governance best practice, or if you need help with your New Zealand tax governance strategy, KPMG’s Tax Barometer (PDF 3.40MB) should be of interest. This is a tool specifically designed to help boards and management understand how tax strategically sits within their organisation and ensure the desired tax profile is resulting.