A Week in Review

Richard AshbyPartner, Gilligan Sheppard

OECD Work Continues

Those of you who managed to digest last week’s AWIR, will recall my comment regarding the OECD’s present project, The Programme of Work and its two pillared approach, and the likely soon to be released public consultation document on the second pillar.

Well as Murphy’s Law would have it, no sooner had I pushed the send button to last week’s edition (ok, so figuratively speaking as actually Lisa here pushes that button!), out popped the second OECD document titled the Global Anti-Base Erosion (GloBE) Proposal.

This document in part focuses on the remaining BEPS issues and seeks to develop rules that would provide jurisdictions with a right to “tax back” where other jurisdictions have not exercised their primary taxing rights or the payment is otherwise subject to low levels of effective taxation.

The OECD now seeks feedback from the public in relation to three specific technical design aspects of the Pillar Two proposals:

  1. The use of financial accounts as a starting point for determining the tax base,
     
  2. the extent to which an MNE can combine income and taxes from different sources in determining the effective (blended) tax rate on such income, and
     
  3. stakeholders’ experience with, and views on, carve-outs and thresholds that may be considered as part of the GloBE proposal.

Comments are requested to be provided no later than 2nd December 2019.

 

AML Guidance – tax evasion, tax fraud and money laundering

IR has released a new guidance document, to assist AML/CFT Reporting Entities with understanding the potential links between tax evasion, tax fraud and money laundering.

The factsheet explains that the three concepts often go hand-in-hand, given that those involved in tax evasion or fraud will often need to launder the funds in order to benefit from the proceeds of their actions.

IR 1061 commences with an explanation of what is considered to be tax evasion (intentionally not paying the correct amount of tax) and what is tax fraud (use of a document to obtain a financial/personal gain), and how a client’s response to questions from you regarding source of wealth/funds, that certain amounts are non-taxable (gifts, inheritances, casino winnings for example), could in fact be an attempt to obscure the true origins of funds.

To illustrate the point further, IR’s document provides several case examples of tax evasion and tax fraud, and then lists potential “red flag” events, including:

  • No cash sales when some would be expected or cash sales when they would not be expected;
     
  • Use of a personal bank account for business transactions;
     
  • Transactions involving known low or no-tax jurisdictions;
     
  • A lack of supporting documentation or a lack of willingness to provide supporting documentation; and,
     
  • Secretive about the type of work they do, not willing to explain sources of money.

The following jurisdictions are listed as being considered low/no tax destinations:

Bahamas, Cook Islands, Jersey, Bermuda, Guernsey, Panama, British Virgin Islands, Hong Kong, Samoa, Cayman Islands, Isle of Man, Vanuatu.

Finally the IR document provides some general tax information, targeted to those Reporting Entities perhaps not having a good appreciation of the mechanics of the NZ taxation system.