The New Zealand Government has launched a consultation seeking public feedback on proposals to more effectively tax the digital economy in New Zealand, which include an option for a digital services tax (DST).

Two options are proposed to address the problem of multinational digital companies which do substantial business in New Zealand but pay no tax on income or revenues:

  1. Changing the current international income tax rules, to allow more taxation in market countries. This option is currently being discussed by the OECD and the G20 group of large economies.
  2. Applying a separate digital services tax (DST) of three per cent to certain revenues earned by highly digitalised multinationals operating in New Zealand. The discussion document seeks feedback on how a DST might work in practice.

Finance Minister Grant Robertson said in a media statement that New Zealand’s number one preference remains an internationally agreed solution through the OECD.

“However if the OECD cannot make sufficient progress this year we need an interim solution. Other nations have already taken this step,” Mr Robertson said.

“The UK has announced it will introduce a two percent DST from April 2020. Austria, the Czech Republic, France, India, Italy and Spain have also enacted or announced DSTs.

“We need to protect our economy and the integrity of our tax system. Modern business practices, digitalisation in particular, mean that a company can be significantly involved in the economic life of a country without paying tax on income or turnover.

“Multinational companies like social media platforms and e-commerce sites generate income through cross-border digital services rather than face-to-face retail.”

The DST outlined in the New Zealand discussion document would apply to:

  • platforms which facilitate the sale of goods or services between people, such as Uber and Airbnb and eBay;
  • social media platforms like Facebook;
  • content sharing sites like YouTube and Instagram; and
  • companies which provide search engines and sell data about users.

“A DST would be narrowly targeted at certain highly digitalised business models. It would not apply to sales of goods or services, but to digital platforms who depend on a base of users for income from advertising or data,” Grant Robertson said.

“The value of cross-border digital services in New Zealand is estimated to be around $2.7 billion. The estimated revenue of a DST is between $30 million and $80 million, depending on the design.”

Revenue Minister Stuart Nash said the Tax Working Group concluded New Zealand should continue to participate in the OECD discussions but also stand ready to implement a DST if a critical mass of other countries move in that direction.

“The OECD is seeking approval for its digital economy work programme from the G20 group of large economies at a meeting in late June. The progress made at the OECD to date has not been sufficient to allay the concerns of several countries, who have announced or introduced DSTs as unilateral interim measures.

“Any DST in New Zealand would be an interim measure. The Government would look to repeal it if and when the OECD’s international solution was implemented,” Mr Nash said.

The discussion document can be found at Consultation closes on 18 July 2019.


On the blog

Sharing the Burden: Taxation of the Peer-to-Peer Economy, by Aqib Aslam and Alpa Shah (8 February 2018)

International Taxation in the Digital Economy: Challenge Accepted?, by Marcel Olbert and Christoph Spengel (14 August 2017)

The ‘Netflix Tax’: What Can We Learn from the EU-MOSS Scheme?, by Teck Chi Wong (9 January 2017)

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