Jobs abroad no longer a tax haven

Press, 21 August 1979, Page 2

Jobs abroad no longer a tax haven

PA Wellington The tax men are cracking down on New Zealanders who work overseas for long periods and fail to pay tax anywhere. People who work for New Zealand organisations overseas for more than 15 months, but keep their New Zealand residential status can no longer expect to avoid tax by not declaring their incomes in the other country. The new ruling came to light yesterday when the Commissioner of Inland Revenue (Mr T. M. Hunt) was asked to comment on a case in which he required an employee of an agricultural company to pay New Zealand tax while overseas and hieing paid by his New Zealand employers. According to a Press Association message from China, where the Minister of Agriculture (Mr Maclntyre) is visiting with a group of New Zealand businessmen the company involved has lodged an appeal. If the new stance was to he maintained it would add thousands of dollars to the costs of New Zealand companies working globally who had to hire internationally known experts to do their

Companies could avoid being subject to the New Zealand requirement by registering a overseas company in such tax havens as the Bahamas, as some had. the businessmen said. Mr **mt said he was unable to discuss the special case cited by the businessmen. but the law was that people whose homes were still in New Zealand were liable for tax on their world incomes. ’ ‘The rule of thumb is that when a person is abser.* for

mc.e than 15 months and pays tax in the other country, we regard them as nonresidents and they do not have to pay tax here. "When people do not pay any tax in the country they go to we say the rule of thumb does not apply. “You are liable for tax on your world income with credit for any tax paid overseas.”

Mr Hunt said the Inland Revenue Department had discovered recently that some people had not declared their incomes in the other countries and paid no tax. Academics were the first group to come to light. “We thought it was not a fa' go,” Mr Hunt said. “There have not been excessively large numbers avoiding it. It has just been one of those things which come to your notice. “If business people feel the situation is adverse it would be proper to make representations to the Cover- men* ”

Should the appeal fail several New Zealand consulting firms working internationally might find it difficult to keep their competitive position, the businessmen said.

Salaries were generally between $30,000 and $35,000. New Zealand companies could afford them when New Zealand tax rates were not imposed on the recipients. Should the rates be imposed the amount paid would have to be doubled to ensure the employee received the same net return.

Most consultancy companies could not afford the extra wage bills entailed. The burgeoning new service industry bringing in hundreds of thousands in overseas funds to New Zealand annually would be severely affected, they said.