ON AIR: Early Edition

5AM - 6AM

Government unveils plans to tax multinational corporations

Author
Newstalk ZB ,
Section
Politics,
Publish Date
Tuesday, 4 June 2019, 2:33PM
The Government has two options they are exploring. (Photo / Getty)
The Government has two options they are exploring. (Photo / Getty)

Internet giants like Google and Facebook could soon be paying more tax in New Zealand as the Government moves to take submissions on a 'digital services tax'.

A digital services tax would apply to digital revenues created in New Zealand, whether that be through social media platforms, content sharing sites like YouTube, companies advertising online and e-commerce sites that facilitate the sales of goods and services such as Airbnb, Uber and eBay.

In February Cabinet agreed to investigate a new tax on multinational companies targeting digital revenues. Today, Finance Minister Grant Robertson and Revenue Minister Stuart Nash have announced two proposed options to ensure offshore technology companies no longer enjoy tax breaks.

Government is proposing to change the current international income tax rules to allow more taxation in market countries. A similar option is currently being discussed by the OECD and the G20 group of economies.

The second option is to apply a digital services tax of three per cent to revenues earned by highly digitalised multinationals operating in New Zealand.

Robertson said Government's priority was an internationally agreed solution implemented through the Organisation for Economic Co-operation and Development (OECD). The Government, however, would look to implement an interim solution if the OECD could not make "sufficient progress this year", he said.

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

"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."

A digital services tax would not apply to sales of goods or services. It would be targeted to digital platforms who depend on a base of users for income from advertising data, he said.

Government estimates such tax could raise between $30 million and $80m each year. The value of cross-border digital services in New Zealand is estimated to be around $2.7 billion.

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 separate digital services tax if a critical mass of other countries move in that direction.

"The Government is committed to future-proofing the tax system to ensure it can handle changes to how people work and how business is done," Nash said.

"The significance of the digital economy is only going to grow over the coming decades. We need to keep adapting to ensure multinationals who do business here are paying their fair share of tax."

Governments around the world have increasingly been moving to introduce a similar digital tax in recent months.

Britain has announced it will introduce a two per cent digital services tax from April 2020, and Austria, the Czech Republic, France, India, Italy and space have also moved to enact or announce a digital services tax.

Submissions on the discussion document close on July 18.

The discussion document said legislation for a digital tax could be introduced in 2020, which is an election year.

 

ON AIR: Early Edition

5AM - 6AM