18 Feb 2019

Move to introduce digital tax for foreign companies profiting online

8:59 pm on 18 February 2019

New Zealand is lining up to introduce a new tax on multinational companies that make money out of online goods and services in this country.

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Photo: Photo / AFP

It will target social media companies like Facebook, content sharing sites like YouTube or Instagram, those that offer intermediary services like Uber, Airbnb and eBay and others that earn income from online advertising.

The Digital Services Tax is being worked on at the moment, with a discussion document to be released in May. It will then go for public consultation before a structure is agreed on and the tax can be implemented.

Minister of Police, Stuart Nash. The Government is responding to increased drug-related deaths by cracking down on the suppliers of synthetic drugs.

Revenue Minister Stuart Nash says the Digital Services Tax is being worked on and will go for public consultation afterwards. Photo: RNZ / Rebekah Parsons-King

All going well, Revenue Minister Stuart Nash said it would be in place next year.

He said New Zealand had been working at the OECD for a global solution to this issue. But he said OECD was quite "slow moving" and this tax would act as an interim measure until an agreement was reached.

"[These companies] currently earn significant income from New Zealand consumers without being liable to income tax," Mr Nash said.

International tax rules had not kept up, he said, and long term this threatened the sustainability and integrity of the revenue base and the fairness of the tax system.

Finance Minister Grant Robertson said the value of cross-border digital services in New Zealand was $2.7 billion and the government was committed to ensuring multinational companies paid their fair share of tax.

"Our revenue estimate for a digital services tax is between $30 million and $80 million, which depends on how it is designed," Mr Robertson said.

Prime Minister Jacinda Ardern said New Zealand was following the lead of other countries in this space, including Australia, France, Germany, Italy, Spain, Austria, the UK and the US.

"It's fair to say there is a growing mood - this was one of the issues discussed at Davos, that you heard in the margins of the meetings - we are not alone in moving in this direction," she said.

"I think there's a general acceptance from those who are going to be affected that it's time to step up."

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