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EU considers sanctions on New Zealand over tax laws

New Zealand tax

The European Union (EU) is considering imposing sanctions on New Zealand over the country's tax laws, Newshub has reported.

The news comes amid New Zealand's failure to comply with new standards dictating the best practice for tax laws.

Tax laws and how they are applied to tax havens around the world have come under increased scrutiny on the back of the recent Panama Papers leak, meaning that any country deemed to have lax laws is likely to be investigated by authorities.

It comes ahead of the EU's plans to create a blacklist of global tax havens, with authorities confirming last week that New Zealand, which is the union's third-largest trading partner, is set to be investigated.

The news cannot be taken lightly be the country's government, which benefits from around £10 billion worth of exports to the EU every year, with the hardline approach largely being driven by the European Commissioner for Economic and Financial Affairs Pierre Moscovici, who insists there will be no exceptions to the rules.

According to Newshub, he said: "Let's call a spade a spade. Non-cooperative jurisdictions are tax havens. We have to list them through a common EU blacklist and to be ready hit them with appropriate sanctions if they refuse to change.

"When a country is on that sort of list, it already knows that the eyes are on it or her and that media are there, that investigations start and the first motivation of the country is to get out of it," he says.

The New Zealand government will be made all the more concerned by the fact that not getting its house in order could lead to a potential free trade deal with the EU risk being shelved.

However, the country's revenue minister Michael Woodhouse has moved to play down any fears, adding that although the government was aware of the investigation it was confident there would not be any negative consequences.

He said: "The Government is confident that any objective inquiry will come to the same conclusion that the OECD and the Global Forum on Transparency and Exchange of Information for Tax Purposes did when they reviewed New Zealand's tax settings and found us to be fully compliant with OECD standards."

While insisting that the country was capable of meeting international standards, he said the country would always be open to ideas on how it could make further improvements.

"That's why the Government has agreed to act on all of the recommendations from the Shewan Inquiry to ensure our disclosure rules are fit for purpose," he added.

Mr Woodhouse said the government had already been working with the OECD in order to develop a response to base erosion and profit shifting (BEPS) tax strategies.