Recent annual reports from New Zealand’s four big banks show that New Zealand is $300 million better off now that the government has legislated to ensure that banks are paying the full amount of tax that they owe. That’s $75 per person. As the Herald reports;
“That will be of some comfort to those who two years ago were incensed to learn through Reserve Bank figures that despite claiming to be paying tax at close to the corporate rate, four of the five main banks at the time were paying less than 10c in the dollar.”
“The banks made use of “conduit” rules introduced to make New Zealand a more attractive base for international business deals.
“The rules specified that if an overseas-owned company in New Zealand invested in another overseas entity, it would pay only 15 per cent withholding tax on the distribution of any profits or dividends from the transaction. The rules were especially advantageous to the banks, as being ‘thinly capitalised’, with debt of up to 97 per cent on their balance sheets, they could write off huge interest costs from raising debt overseas while qualifying for a reduced tax liability on the income generated by the deals.”
(Thanks to jackfrancis for the photo)
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