New tax rules for foreign owned banks

Revenue Minister Michael Cullen has announced the Government’s intention to introduce legislation to ensure foreign owned banks operating in New Zealand pay enough tax on their New Zealand income.

In connection with the proposal, Dr Cullen has said:

• “The New Zealand tax payments of foreign owned banks have not appeared to reflect their reported profits in recent times … I am advised that they are using certain features of our tax rules to pay less tax in New Zealand”.
  
  
• “If banks want full interest deductions for tax purposes, they will also be required to have enough capital in New Zealand to fully fund their offshore investments”.

In developing the proposals, the Government has consulted with the banking industry to address their concerns.

The legislation, expected to be included in a taxation bill to be introduced later this year, will ensure foreign owned banks are carefully monitored to ensure that they pay a level of tax appropriate to their New Zealand operations, with an expected increase of $360 million per annum.

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