Government to close petroleum mining tax loophole

The government will close a legislative loophole to prevent New Zealand missing out on significant tax revenue from the burgeoning petroleum mining industry, Finance Minister Michael Cullen and Revenue Minister Peter Dunne announced today.

“Under current law, New Zealand petroleum miners can offset their expenditure in other countries against the revenue from their New Zealand operations,” Dr Cullen and Mr Dunne said.

“That means New Zealand might receive less income tax than expected on profits from oil production in New Zealand, which is particularly unacceptable when oil production revenue from New Zealand is at an all time high and predicted to grow.

“To safeguard our taxing rights on our petroleum resources, the government will amend the Income Tax Act to ensure that expenditure on petroleum mining operations undertaken through a foreign branch cannot be offset against petroleum mining income from New Zealand.

“That will bring New Zealand’s taxation of petroleum mining revenue into line with the practice of a number of other countries.

“The changes will be included in the next taxation bill and, once enacted, will be effective from today. Expenditure incurred before today will not be affected by the changes.

“In the meantime, the government will be consulting with the petroleum mining industry on the details of the planned changes.

“New Zealand oil and condensate production is at levels not seen since the time of the Maui B development in the 1990s, with four major developments that are in production or due to begin within the next 12 months.”

“It is estimated that over the next ten years the gross revenue from petroleum mining in New Zealand will be about $20 billion.

“It is therefore essential to ensure that New Zealand receives its proper share of benefit from its petroleum resources,” they said.