New Zealand is to join a growing list of member states by setting out plans to introduce a new tax law that will require multinational companies such as Google, Facebook and Amazon, to pay their ‘fair share’ of tax revenue, Reuters reports.
PM Jacinda Ardern, announced the move at her post-cabinet press conference on Monday (Feb.18th).
According to the report, Ardern said the cabinet has agreed to issue a discussion document on how to update the country’s tax framework in order to prevent corporations from using loopholes to avoid their tax liabilities.
The current tax system “is not fair”
“Our current tax system is not fair in the way it treats individual taxpayers, and how it treats multinationals,” Ardern told reporters at her weekly post-cabinet news conference.
Digital companies, such as social media websites, trading platforms, and online advertising, currently earn a significant income from New Zealand consumers without being liable to income tax, Ardern said.
The value of cross-border digital services in New Zealand is estimated to be around NZ2.7bn ($1.86bn/£1.43bn).
The revenue estimate for digital services is between NZ$30m ($20.6m/£15.9m) and NZ$80m ($55m/£42m), finance minister, Grant Robertson, said.
The tax rate for Digital Services Taxes (DST) is around 2-3% on the gross revenue earned by a multinational company in that country.
A number of countries including the UK, Spain, Italy France, Austria and India have passed or announced a DST. The EU and Australia are also consulting on a DST.
Officials will finalise the New Zealand discussion document on the matter, which is likely to be released to the public, by May 2019.
Germany’s tax reform
The news comes after Germany’s finance ministry said last week that it is planning to issue a 15% corporate tax on large internet firm like Google and Facebook that earn income from online advertising, according to a Wirtschaftswoche magazine report which was published last Friday (Feb.15th).
The move could involve payments for online advertisements in the same way as licence fee payment, which could make German companies subject to withholding tax being deducted.
The finance ministry had confirmed that plans, but stressed there was no agreement on how to proceed between federal finance authorities and individual states, the magazine reported.