An EY global survey, highlighted in a recent article in the Sydney Morning Herald indicates that increases in audit activity are part of a broader global trend. The paper writes:
An annual survey by the global accounting firm Ernst & Young found tax authorities are becoming more aggressive and forcing companies and governments into more clashes over tax laws, The survey, based on interviews with 541 senior tax and finance executives, concludes that the world has entered a period of elevated risk for tax controversy. Findings were that audits are more frequent and aggressive, making them more costly to defend or litigate. Tax assessments and penalties have now entered the realm of billions of dollars. Companies [also] face unprecedented scrutiny and reporting of their tax affairs by advocacy groups and the media. Read more
Yesterday the Government announced that the new Australia/New Zealand double tax agreement has entered into force. This means that both countries have completed their domestic law requirements for incorporating the treaty into their respective laws. The way is clear for the provisions of the treaty to apply.
The application dates are different for different types of tax. The first relevant application date is the provisions relating to Fringe Benefit Tax (“FBT”). Briefly the Article provides that FBT will follow the taxing rights of salary and wages, thereby reducing the possibility of double FBT. The provisions apply from 1 April 2010, and is slightly different compared with the 1995 treaty position.
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The well publicised new Associated Persons Rules are due to come into force within the next week or two and already there is uncertainty about their application. The rules are possibly the most complex part in the Income Tax Act, and what makes things worse is that they play a very important role in the taxation of some of the largest assets traded in New Zealand – i.e. real property. It is therefore very important that everyone understands exactly what they are, and how to apply them.
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