So, to start off, with what is tax transparency? There are two main areas of tax transparency, the first is reporting what your contributions are to taxes and the second is reporting your tax governance, i.e. what you are doing about tax risk. In New Zealand, Inland Revenue encourages large taxpayers to include a note in their annual report on tax governance. However, unlike Australia, New Zealand doesn’t have mandatory tax transparency reporting. Many companies may wish to explore doing this voluntarily and report on how much tax they're paying in the different tax areas (direct and indirect taxes). New Zealand listed companies are required to make climate related disclosures from 2023 through an ESG or sustainability report. Tax paid could be included in those reports.

As described in the Government’s tax policy work programme for 2021-22, “[t]he Government is committed to improving the environment, and tax settings that promote a sustainable economy are a key part of that”. However, the focus is still on neutrality, i.e. reviewing existing tax provisions to ensure they are not biased against environmentally-friendly investment and behaviour. This differs from the approach taken in Australia, where their government appears to be actively influencing people towards more sustainable options by setting tax policies like a complete exemption from FBT for electric vehicles. The recent proposal in the Taxation (Annual Rates for 2022–23, Platform Economy, and Remedial Matters) Bill (No 2) to exempt FBT on public transport subsidies was initially opposed by Inland Revenue but pushed through by the Government.

Many multinationals are having to re-think their global supply chains, both in response to vulnerabilities highlighted through the pandemic but also due to the environmental and social impacts. As these changes are made, they are likely to impact transfer pricing and customs duties, so the tax implications of the changes will need to be reviewed.

Employers are looking at the benefits that they provide to employees to ensure they continue to be relevant and reflect employee expectations, particularly considering the trend to flexible working. A CBD “on-premises” carpark that is exempt from FBT may be a tax efficient benefit but doesn’t align with sustainable commuting options such as public transport or ridesharing, and may sit empty when employees are working remotely. However, contributing to the cost of an employee’s e-bike has tax implications that need to be worked through.

Sustainabilty linked loans are a good example of one of the ways that capital markets have responded to ESG issues, by essentially developing a product where the interest rate can change and be either discounted or have a penalty applied (possibly between one and 10 basis points) depending on meeting a range of verified social or environmental criteria. Many large businesses, like Deloitte, are starting to use these types of loans. However, these products are also now becoming available to business banking more generally, with Kiwibank providing sustainable business loans to fellow B:Corps and banks such as ASB and BNZ making them available to farmers. We have worked through several considerations with regards to how the financial arrangement rules apply to these types of loans and predict that as the KPIs that influence the loan get more complex the tax outcome may follow suit.

Another example of where the Government has made tax policy changes that help people ‘do good’ is with respect to donated trading stock. Introduced as a COVID-19 exemption, there is currently a measure (through to 31 March 2023) to remove the tax obligations that arise under section GC 1 of the Income Tax Act 2007 to treat the donations of trading stock as a sale at market value. Amongst other things, this concession ensures there isn’t a tax incentive to send obsolete stock to the landfill.