New Zealand has a problem: large multinational companies like Facebook, Amazon, and RT cheating ontheir taxes. Now Labour is proposing a solution: a diverted profits tax:
Labour is promising to claw back hundreds of millions of dollars a year from multinationals such as Apple, Facebook and Google if they don't pay their fair share of tax.
If elected, the party would impose a diverted profits tax (DPT) on multinational firms that sent profits offshore to minimise their tax bill.
Leader Andrew Little has written to 50 multinationals setting out the pledge.
He told Morning Report an extra $200 million a year could be collected, which would make a "huge difference" and represented "a heap of teachers, a heap of nurses and doctors".
The basic mechanism is a deemed rate of tax on anything routed through a tax haven. Both the UK and Australia have such mechanisms, and they seem to be successful in eliminating transfer pricing and making these countries pay their fair share. There's no reason why such a policy wouldn't work here. The trick is getting a government that wants to tax the cheats rather than defend them.
