4 Jun 2019

PwC partner warns against rushing into multinational taxes

7:14 pm on 4 June 2019

A tax expert is warning the government should not rush into taxing large online multinational companies like Facebook.

Stuart Nash

Revenue Minister Stuart Nash Photo: RNZ / Dom Thomas

Revenue Minister Stuart Nash has released the Digital Services Tax discussion document this afternoon, which is now open to consultation.

The platforms affected would be companies like Uber, Facebook, Youtube, Instagram and Airbnb.

In it, the government calls for responses to options including a flat Digital Services tax of 2 percent to 3 percent, or a minimum tax that would apply beyond the digital economy and could be adopted in addition to the other proposals.

The OECD is already considering two solutions, which will also be part of the government's consultation plan.

Mr Nash said the government ideally would adopt a solution agreed among OECD countries.

"The OECD have said that it would like to reach consensus in June this year and if they do, fantastic, but it looks to be a little bit of an impasse at the moment with the OECD.

"What we thought we'd do is get a discussion document out there, get a feel from the tax paying community, what they would like and make a decision from there," he said.

In the meantime, the UK has announced it will introduce a 2 percent digital services tax from April 2020.

Austria, the Czech Republic, France, India, Italy and Spain have also enacted or announced a tax.

However, PwC tax partner Geof Nightingale said New Zealand we would be better off waiting for the OECD decision than going it alone.

"We're such a tiny country and we're very trade exposed and trade dependent ... I just think they we would be better off sticking with an OECD-consensus based approach, which will arrive at an answer that's unlikely to cause any retaliatory affects for New Zealand," he said.

"If we decide to start taxing the gross revenues of the people providing services into New Zealand, then other countries may decide to tax the gross revenues of New Zealand companies exporting services and even goods to their markets, and that's the risk we face," he said.

Mr Nash said those concerns would be addressed, however.

"Let's flesh that out in the discussion document, I'm assuming a lot of these big players will submit as well, so we'll take a look at that, we'll understand the risks and the benefits before we move forward.

"We haven't decided to implement a digital services tax, what we are deciding is to go out to the market and get a feel if we should be doing this," he said.

Mr Nash said if the tax was implemented there would be a clause that it would be repealed once a consensus was reached with the OECD.

He said that in the meantime New Zealand needed to maintain the integrity of its tax system.

Prime Minister Jacinda Ardern said its a basic matter of fairness.

"Take a motel operator, do they think it's fair that they're being treated differently than someone who is offering a service via for instance Airbnb?" she said.

"When it comes to those companies that are deriving profit out of advertising domestically, it's only fair those multi-national companies pay their fair share."

Ms Ardern said the value of cross-border digital services in New Zealand was $2.7 billion, so it was not unreasonable for the companies to pay tax.

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