No word on tax plan for multinational firms
A proposed ‘‘digital services tax’’ on internet giants remains on hold, almost four months after public consultations closed.
Prime Minister Jacinda Ardern floated the idea of a 2-3 per cent tax on the local revenues of internet advertising and ‘‘gig economy’’ companies such as Facebook, Google, Uber and Airbnb in February.
The revenue tax would be in addition to any taxes multinationals paid on their locallyreported profits, with officials estimating it could raise an extra $80 million per year.
Submissions on the possible tax closed in July but a spokeswoman for Revenue Minister Stuart Nash said there was no decision to report on whether the proposal would advance.
There have been calls to scrap it. Fonterra, Spark, Trade Me, The Warehouse and Air NZ expressed fears that unilaterally imposing what has been dubbed a ‘‘Facebook tax’’ could invite retaliation or otherwise backfire, according to submissions previously released under the Official Information Act.
The Corporate Taxpayers Group called in its submission for the Government to announce it would abandon the proposal ‘‘to minimise damage to New Zealand’s reputation’’. But the Government has left a digital services tax (DST) on the table while it waits to see if its preferred option of a new international approach to the taxation of the digital economy comes to fruition.
World economic group the OECD has released two proposals in recent weeks. One would require ‘‘highly profitable’’ multinationals – including but not limited to digital companies – to allocate a portion of their profits to any country in which they had significant consumer-facing activities, regardless of whether they had a physical, taxable presence. The second would ensure multinationals were subject to a minimum rate of tax, by allowing countries to tax a portion of the profits booked in tax havens or low-tax countries, to bring tax payments up to an agreed level.
Russell McVeagh partner Brendan Brown said there was as yet no international agreement for either measure.
But Brown believed the Government might as well kill off its DST proposal, as Australia did in March, in the interim. ‘‘It is almost impossible to design and implement a DST without breaching international law.’’
Consultations on the two OECD tax proposals will be held in Paris next week and in early December.