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Multinational online companies set to face tax - boosting NZ coffers by $30-$80m

The Government is planning a digital services tax on multinational companies providing online services like social media networks, trading platforms and online advertising.

Cabinet has agreed to issue a discussion document about how to update New Zealand's tax framework to ensure multinational companies pay their fair share of tax in this country, Government ministers announced today. 

"Highly digitalised companies - such as those offering social media networks, trading platforms and online advertising - currently earn a significant income from New Zealand consumers without being liable for income tax," Finance Minister Grant Robertson said. "That is not fair, and we are determined to do something about it.

"International tax rules have not kept up with modern business developments. In the longer term this threatens the sustainability of our revenue base and the fairness of the tax system."

The current tax rules also provide a competitive advantage to foreign companies in the digital services field compared to local companies who offer e-commerce, online advertising and social networking services, Mr Robertson said.

The value of cross-border digital services in New Zealand is estimated to be around $2.7 billion, he said. 

"We are determined to ensure that multinational companies involved in this sector of the economy pay 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."

The Government says digital services taxes are generally charged at a very low flat rate of 2 to 3 per cent on the gross revenue earned by a multinational company in that country. 

A number of countries including the UK, Spain, Italy, France, Austria and India have enacted or announced a digital services tax, while the EU and Australia are consulting on one.

Digital services taxes do not apply to goods or services, but to digital platforms who depend on a base of users. 

These may include social media sites 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. 

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Jacinda Ardern says it's not fair that digital companies can do significant business here without being subject to tax. Source: 1 NEWS