Target on DIGITAL GIANTS
Government plan includes 2% to 3% levy on the revenue of multinational digital giants
Facebook & Google
The Government has put some of the world’s biggest companies in its tax crosshairs — including Facebook and Google. Prime Minister Jacinda Ardern (pictured) said it wanted to make sure multinational companies paid “their fair share of tax” in New Zealand. The Government’s plan includes a 2-3% tax on the revenue of multinational digital giants, expected to bring in between $30-$80 million a year.
Huawei
Meanwhile, the Government’s preliminary decision to ban Chinese telco Huawei from New Zealand’s 5G network has hit a new twist: Reports suggest Britain has given Huawei the green light to help roll out its mobile network, breaking ranks with the US and other allies.
Ardern did not offer a view on this news but said: “We do place a very high priority on our relationship with China.”
The Government has put some of the world’s biggest companies in its taxation crosshairs, meaning the likes of Facebook and Google could soon be hit by a new tax.
Prime Minister Jacinda Ardern yesterday said Cabinet had begun updating New Zealand’s tax system in a bid to make sure multinational companies paid “their fair share of tax” in New Zealand.
Although details are limited, the Government’s plan includes a 2 to 3 per cent tax on the revenue of multinational digital giants.
It’s expected to bring in between $30 million and $80m a year for NZ, depending on the tax’s design.
The move is part of a wider global trend as various other OECD countries explore similar tax options.
Ardern said highly digitalised companies, such as those offering social media networks, trading platforms, and online advertising, earn a significant income from Kiwi consumers without being liable for income tax.
“That is not fair, and we are determined to do something about it.”
And National agrees — the party’s finance spokeswoman, Amy Adams, said National thought multinationals should pay their fair share of tax.
Companies likely to be hit by such a tax include the likes of Facebook, Google and Twitter.
The value of cross-border digital services in New Zealand is estimated to be roughly $2.7 billion.
NZ is not the only country concerned about big digital companies not paying enough tax — the OECD has been trying to find an internationally agreed solution for years.
Although Ardern said progress had been made, it could still take several years for a tax solution to be reached and this tax will be an interim one until a more globally focused alternative is agreed.
New Zealand companies pay a 28 per cent tax on their profits, but nothing on revenue.
The companies likely to be hit with the new tax do not pay company or income tax.
Revenue Minister Stuart Nash would not name which companies he expected to be hit by a tax such as this but said it would be “obvious” who would be targeted — citing social media companies as an example.
The Government’s announcement comes as it faces questions over another multinational company, Huawei, and its bid to help Spark build a 5G network in New Zealand.
The Government’s spy agency, the GCSB, banned Spark from using the Chinese telco giant’s gear, warning it could raise a significant national security risk, according to Spark.
New Zealand shares yesterday edged slightly lower as fears over the country’s trade relations with China unnerved investors.
New Zealand’s benchmark index was one of the few to decline across Asia, dipping by 0.2 per cent.
Addressing media yesterday afternoon, Ardern said Cabinet agreed to issue a discussion document in relation to the new tax, which would seek feedback on any proposed changes to the way multinationals were taxed.
Nash said it will be released in May. New Zealand’s move comes as a number of other countries also consider reassessing their approach to the taxing of multinationals.
Ardern listed several which have been looking at a similar tax, including Australia, Britain, France, Spain and Austria. India has also decided not to wait for the OECD.
The proposed tax in France, for example, is a levy on all internet direct sales, advertisements and the sale of private data.
But similar measures being discussed by the United States, the European Union and Britain are limited to online advertising.
Although welcoming the taxing of multinationals more, the National Party’s Adams said a country as small as New Zealand would find it difficult to go out on its own.
“We support the OECD work being ramped up. The solutions to these problems is best achieved by countries working together.”
A Herald investigation into corporate tax avoidance in 2016 found 20 of the most aggressive multinational companies recorded $10b in annual revenues, but collectively paid less than $1.8m in corporate income taxes.