Managing International Taxation During New Zealand’s Lockdown

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Country Correspondent- John Nash

 

It’s been a very challenging period in New Zealand, just like the rest of the world, in dealing with the COVID-19 crisis, not just in respect of the health aspects but also the economic impact we are all experiencing.

New Zealand went into “lockdown” on 20 March 2020 and since then there has been a range of Government fiscal initiatives which Inland Revenue has been at the forefront of implementing as well as endeavouring to do “business as usual” while also completing our fourth phase of the major transformation programme to which we have been committed.

In my personal case, it has meant working almost entirely from home, relying solely on electronic means, and keeping in touch with my leadership team, my own staff and other colleagues via Microsoft Teams technology. On four recent nights I have participated in a regular OECD meeting, this time held virtually via Zoom video conferencing with over 200 participants.

On the international front, there have been considerable disruptions to business production and supply chains, closures and suspensions of facilities and outlets, temporary relocations of functions to address geographical risks, reduced productivity and constrained workforce mobility. In short, the pandemic has resulted in exceptional economic circumstances globally which we have not seen in any of our respective taxation careers.

As a consequence, Inland Revenue has had to reprioritise its international programme – much less compliance work and much more service. We have had to focus on a wide range of immediate issues
notably:

  • Providing guidance on residence and permanent establishment rules impacted by unforeseen travel restrictions;

  • Working with the Global Forum and the US IRS to extend reporting timelines for the Common Reporting Standard and FATCA to smooth compliance by financial institutions; and

  • Advising multinationals and liaising with our Customs Service on required revisions to transfer pricing settings due to reductions in sales, net earnings and asset values brought about by sharp increases in costs and reductions in demand.

In all the above matters we have followed the general advice of the OECD that tax authorities should treat tax consequences that arise from the disruption of the pandemic in a reasonable manner and consider the underlying exceptional circumstances.

The COVID-19 crisis will surely pass but its effects on international taxation will be with us for some considerable time, as will the new ways of working so many of us have embraced during the lockdown.



 





 





 



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John Nash