New Zealand: Corporate tax governance

Country Correspondent: John Nash

Two years ago I reported in this newsletter on an initiative we had launched focusing on tax governance of significant enterprises operating in New Zealand. In our view, without question, sound tax governance is fundamental to good tax compliance.

We have recently carried out a representative survey of significant enterprises, both New Zealand-owned and foreign-owned, as to their tax governance practices. The answers, together with considerable additional contextual information, have provided many useful insights for our forward programme of work.

Tax administrations need to be careful in prescribing rules in relation to tax governance. We prefer a more tailored approach based on the facts and circumstances of the business rather than a ‘one size fits all’ approach. Overall, we were generally pleased with the steps being taken to improve tax governance and ensuring sufficient resources are being applied to tax compliance matters. We are keen to see this momentum continue and reach an ‘established’ level of maturity.

We identified three specific areas for improvement this year and have publicised them:

·         Improved documentation of both overarching tax strategies and tax control frameworks.

·         Greater testing and updating of controls.

·         More and better reporting of tax risks to boards of directors.

In shaping our programme of work for the year ahead, we are focusing in particular on the Top 50 enterprises, not only the largest businesses but generally the most complex. We have already indicated to this sector that we want to see evidence of robust processes in place, resulting in a high degree of capability. Our work will include walk-throughs to test systems in respect of key risk areas, as well as understanding and evaluating controls and the internal monitoring undertaken.