GOVERNMENT INTRODUCES NEW DIGITAL SERVICES TAX BILL. The government has introduced the Digital Services Tax Bill into parliament which is expected to generate $222m in funds over 4-years. The Bill would allow the government to implement, at an appropriate time, a digital services tax.
The Bill comes in response to the increasing digitalisation of commerce, and our limited ability to tax overseas digital business models. As it stands large multinational companies such as Google and Apple are paying little to no tax in New Zealand, despite making a considerable amount off of New Zealand consumers.
The Bill proposes a 3% tax on revenue connected to New Zealand users or land for large overseas digital services platform providers. The tax will apply to providers with annual global revenue of at least €750m and annual New Zealand revenue of at least $3.5m. Taxable services include intermediation platforms, social media, content sharing platforms, internet search engines, digital advertising, and user generated data.
The Bill is expected to come into force on the 1st of January 2025, which can be deferred for up to five years. This is because New Zealand is working closely with other countries and the OECD to build a multi-national digital services tax agreement. This is the preferred option of the government. The proposed bill is intended as an intermediary and will be repealed if an acceptable multinational agreement is reached.
Concerns have arisen over what the tax would mean for the users of digital service platforms. Some believe that the tax would be passed on to the end users of the services, which has been the case for some other countries that have introduced a similar tax.
Further, the likelihood of this Bill coming into force largely depends on the outcome of the upcoming election. With potentially not enough time for the Bill to make it through the house, it may be up to the future government to pass the Bill.