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Government eyes tax on digital platforms such as Uber, Instagram

The options for the proposed digital services tax (DST) have been released, with the Government intending to "ensure offshore digital companies no longer enjoy tax breaks which are not available to local businesses". 

Finance Minister Grant Robertson said the proposed tax would apply to outlets such as Uber, AirBnb, Facebook, YouTube and Instagram. 

"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," he said. 

Currently, the OECD is discussing an internationally agreed solution, "however if the OECD cannot make sufficient progress this year we need an interim solution", Mr 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," Mr Robertson said. 

New Zealand's cross-border digital services is estimated to be $2.7 billion, meaning a DST could bring in $30 million to $80 million. 

A DST would be repealed if the OECD came up with an international solution.

Two options for the tax are:

• Changing the current international income tax rules, the option being discussed by the OECD and the G20 group of large economies.

• Applying a separate DST of three per cent to certain revenues earned by highly digitalised multinationals operating in New Zealand. 

Source: istock.com