Second reading for tax bill providing clarity

Revenue Minister Todd McClay says that the Taxation (Annual Rates, Employee Allowances, and Remedial Matters) Bill, which passed its second reading today, is an example of the Government’s focus on coherence and fairness in the tax system.

“Businesses require fairness and certainty from the tax system,” Mr McClay says.

A recent tax complexity survey of Asia-Pacific countries found that New Zealand’s tax policies are generally seen as straightforward, consistent and predictable.

“This Bill continues with the objective of bringing greater clarity to the tax rules and making them easier for businesses and other taxpayers to understand and comply with.”

The main areas of concern addressed in the Bill are employer-provided accommodation, allowances and payments, particularly when they are linked to business travel, secondments and projects.

“The proposals in this bill aim to provide practical rules to help determine where to draw the line between what is taxable and what is not.”

Furthermore, the Bill provides New Zealand financial institutions with an appropriate legal framework to follow when complying with the inter-governmental agreement (IGA) with the United States in relation to its Foreign Account Tax Compliance Act (FATCA).

The Bill also contains measures to address the current non-deductible ‘black hole’ tax treatment of certain items of business expenditure. The changes proposed will clarify the tax treatment of certain company administration costs, and allow a deduction for expenditure on abandoned applications for patents, resource consents and plant variety rights. 

Proposals announced in Budget 2014 will make further improvements to the R&D rules and these will be included in a future tax bill.

“New Zealand is a good place to do business, in part because our laws are routinely maintained to give the business sector and individuals the clarity and certainty they need to fulfil their tax obligations,” Mr McClay says.