In a significant policy move, New Zealand’s Finance Minister Grant Robertson announced earlier this week that the country is gearing up to introduce legislation for a digital services tax. However, the tax won’t be in effect until 2025.
Key Points:
- The proposed tax targets multinational companies with over €750 million in global digital services revenue and NZ$3.5 million from New Zealand users.
- The tax rate is set at 3% on gross taxable digital services revenue in New Zealand.
- The tax is expected to generate NZ$222 million over four years.
- New Zealand is part of ongoing OECD negotiations for a multilateral digital tax agreement, but progress has been sluggish.
The tax aims to ensure that multinational corporations like Google and Facebook contribute their fair share to New Zealand’s coffers. The proposed tax rate is 3% on the gross taxable revenue from digital services in New Zealand, mirroring similar tax structures in France and the UK.
“Governments worldwide are grappling with the issue of under-taxation of tech giants. The current international tax framework is outdated and doesn’t reflect the digital nature of modern businesses,” said Robertson. “While we are part of global negotiations to address these issues, we can’t afford to wait indefinitely for a multilateral agreement.”
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The tax is expected to generate a revenue of NZ$222 million over a span of four years. It will be applicable to companies that have a global digital services revenue exceeding €750 million and a New Zealand-specific digital services revenue over NZ$3.5 million.
New Zealand is not alone in this endeavor. The country has been actively participating in negotiations at the Organization for Economic Co-operation and Development (OECD) to reach a multilateral agreement on digital taxation. However, according to Robertson, the progress on this front has been less than satisfactory.
“We will continue to support the OECD’s efforts, but we have also prepared our legislation, ready to be enacted if the multilateral negotiations don’t yield results,” Robertson added.
This move by New Zealand is a part of a growing global trend to update tax laws that better capture the revenue generated by digital services. It serves as a wake-up call for multinational companies to reevaluate their tax strategies, especially in the Asia-Pacific region where digital transformation is rapidly evolving.
