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Taxing corruption in Australia and New Zealand
Published on 01 Apr 16 by "AUSTRALIAN TAX FORUM" JOURNAL ARTICLE
Facilitation payments to foreign public officials are legal and tax deductible in Australia and New Zealand, within certain parameters. In light of increasing corruption in both countries, this study questions the reasonableness of allowing tax deductions for payments that are classified as bribes by many international bodies.
There are multiple issues with allowing facilitation payments to foreign public officials to be tax deductible. First, if the value of the benefits must be “small” or “minor”, as required by legislation, the primary argument in support of the retention of their tax deductible status — that they are necessary to ensure businesses remain competitive — becomes questionable. Denying tax deductions for small payments is unlikely to have a significant impact on the competitiveness of an entity. Second, there is a lack of clarity in relation to what is permissible in making the facilitation payment.
Words and phrases such as “ensure or expedite”, or “wholly or mainly” allow for broad interpretation of the legislation. Third, and perhaps most importantly, in New Zealand there is no need for the expenditure to have a nexus with the income earning process in order to claim a deduction for a facilitation payment. There appears to be no valid policy reason for why this expenditure is not required to meet the general test for deductibility.
Author profile
Lisa Marriott
Lisa is an Associate Professor in Taxation at the School of Accounting and Commercial Law, Victoria University of Wellington, New Zealand. - Current at 29 May 2019
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