New Zealand aims to make tech giants pay digital services tax

WELLINGTON • New Zealand said yesterday that it plans to update its laws so it can tax revenue earned by multinational digital companies such as Google, Facebook and Amazon, extending an international effort to bring global tech giants into the tax net.

Prime Minister Jacinda Ardern said the Cabinet had agreed to issue a discussion document on how to update the country's tax framework to ensure multinational companies pay their fair share.

"Our current tax system is not fair in the way it treats individual tax payers, and how it treats multinationals," Ms Ardern said at her weekly post-Cabinet news conference.

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, the government said in a statement released after the announcement.

The value of cross-border digital services in New Zealand has been estimated at NZ$2.7 billion (S$2.5 billion).

The revenue estimate for a digital services tax is between NZ$30 million and NZ$80 million, Finance Minister Grant Robertson said in the statement.

Digital services taxes (DST) are generally charged at a flat rate of 2 per cent to 3 per cent on the gross revenue earned by a multinational company in that country.

A number of other countries - including Austria, Britain, France, India, Italy and Spain - have already enacted or announced plans for a DST.

The European Union and Australia are also consulting on a DST.

New Zealand officials will now finalise the discussion document on the matter, which is likely to be publicly released by May.