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NZ Requests Input On Design Of New Digital Services Tax

Wednesday, June 5, 2019

New Zealand's Inland Revenue has launched a consultation seeking feedback on the design of a new digital services tax (DST).

In February New Zealand's Cabinet agreed to consult the public on the problem of multinational digital companies which do substantial business in New Zealand but pay no tax on income or revenues.

According to the Inland Revenue, the two options are:

  • 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.
  • Applying a separate DST of three percent to certain revenues earned by highly digitalized multinationals operating in New Zealand.

Grant Robertson, New Zealand's Minister of Finance, said: "Our 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."

"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, digitalization in particular, mean that a company can be significantly involved in the economic life of a country without paying tax on income or turnover."

The DST outlined in the discussion document would apply to: peer-to-peer trading activities; social media platforms; content sharing sites; and companies that provide search engines and sell data about users.

"A DST would be narrowly targeted at certain highly digitalized 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," Robertson said.