New Zealand Plans Digital Services Tax on Companies Like Meta, Amazon and Google

In a move aimed at addressing tax disparities and ensuring a fair contribution from large multinational corporations, New Zealand announced its intention to enact a digital services tax starting in 2025.

This decision follows the failure of global consensus discussions within the Organization for Economic Cooperation and Development (OECD) regarding the implementation of a unified tax framework.

 

Stalled Global Talks Propel New Zealand’s Independent Action

 

Efforts to modernise taxation frameworks have gained momentum in recent years. The focus has been on adapting tax regulations to account for the revenue generated by tech companies like Apple and Amazon, who can strategically funnel profits through low-tax jurisdictions. A 2021 agreement involving over 140 countries was created to regulate multinational taxation, but the consensus required for a rollout was not achieved at the OECD.

 

New Zealand Takes A Stand

 

The implementation of the landmark 2021 deal has hit a roadblock, as countries equipped with digital services taxes collectively decided to delay their application for at least another year, barring Canada. In response to this, New Zealand has opted to take a proactive stance.

Finance Minister Grant Robertson emphasised that while New Zealand remains committed to supporting a multilateral agreement, it can’t wait for an agreement to be reaches. Fairness in taxation is at the core of this decision, with Robertson highlighting the difference between ordinary citizens dutifully fulfilling their tax obligations and large multinationals avoiding their fair share.

“While we will keep working to support a multilateral agreement, we are not prepared to simply wait around until then to find out,” Finance Minister Grant Robertson said in a statement.

“We don’t think it’s fair that everyday Kiwis pay their fair share of taxes but there’s no tax liability for large multinationals.”

 

 

Filling the Void: New Zealand’s New Digital Services Tax

The proposed digital services tax is a step toward rectifying this imbalance. The tax’s primary targets are multinational enterprises that derive income from New Zealand users of various digital platforms, including social media, search engines, and online marketplaces. This approach seeks to capture revenue from tech giants that exploit the digital landscape for profit, regardless of the geographical origin of their operations.

To operationalise this tax reform, specific revenue thresholds have been established. Businesses generating more than 750 million euros ($812 million) annually from global digital services and over NZ$3.5 million annually from services offered to New Zealand users will be subject to the tax. This is anticipated to yield NZ$222 million in revenue over a four-year period, contributing significantly to New Zealand’s financial landscape.

 

A Balanced Approach

 

The proposed tax rate of 3% on gross taxable New Zealand digital services revenue aligns with the rates adopted by economies like France and the United Kingdom. This reflects a collaborative approach to ensure multinational enterprises are subject to equitable tax burdens across various countries.

The legislative journey for the proposed digital services tax is set to commence, with the bill’s introduction to the parliament scheduled for Thursday. This step showcases New Zealand’s commitment to address taxation disparities and uphold the principles of fairness and economic integrity.

In a landscape where global consensus remains unclear, New Zealand’s move to independently establish a digital services tax demonstrates a determination to bridge taxation gaps and ensure that large multinational corporations contribute their rightful share to the countries in which they operate.