Combating multinational tax avoidance

25 August 2017
Professor Craig Elliffe small

Global tax expert and Auckland Law School academic, Professor Craig Elliffe, is heading to Brazil this week to give a presentation to the International Fiscal Association (IFA) addressing the common methods used by multinational companies to avoid paying tax.

Professor Elliffe has been invited to speak at the 71st Congress of the IFA being held in Rio de Janeiro between 27 August and 1 September, on the tax implications of fragmenting contracts and activities.

Multinational tax avoidance has received considerable attention in New Zealand and throughout the world. Some multinational corporations have developed a series of strategies to minimise taxation in the countries in which they do business.

In particular, they have developed techniques which avoid taxation by avoiding having a taxable presence. A simple example of this is in the area of contract splitting.

In New Zealand, a taxable presence exists where a business undertakes an installation project for greater than a 12-month period. If the foreign enterprise structures the arrangement so that they have two consecutive 11-month projects undertaken by different but commonly owned subsidiaries then the rule is technically not met.
There has been a significant response from the OECD and G20 countries with proposals to counter this as part of Actions 6 and 7 of the Base Erosion and Profit Shifting (BEPS) project. The BEPS project on multinational tax avoidance has received considerable attention in New Zealand and throughout the world.

The OECD proposes new tests which will be incorporated into the multilateral convention which New Zealand signed in July. The multilateral instrument varies our existing tax treaty settings.

A new OECD model with significant strengthening of anti-avoidance rules is proposed in 2017 and this will influence new bilateral negotiations. New Zealand has also developed its own unilateral solutions to multinational tax avoidance which are being rolled out in consultation with the business community and professional advisory groups.

The 71st IFA Congress has over 2000 attendees made up of lawyers, accountants, revenue officials and academics from all around the world.
Founded in 1938 with its headquarters in the Netherlands, the IFA is the only non-governmental and non-sectoral international organisation dealing with fiscal matters.

New Zealand has a strong presence at this year’s IFA Congress with the session that Professor Elliffe is taking part in being chaired by Carmel Peters from New Zealand’s Inland Revenue, where she heads the international tax policy team.

Professor Elliffe holds a Chair in Taxation at the University of Auckland.