sb-nz logo
Story image

Time's up, tax dodgers: Multinational tech firms may soon pay their dues

19 Feb 2019

Multinational tech and digital services firms may no longer have a free tax pass to operate in New Zealand. Yesterday the Government announced a review of the income tax system that allows multinationals to operate in New Zealand without paying tax – something that Finance Minister Grant Robinson says is ‘not fair’.

As a result, Cabinet will issue a discussion document that looks at ways New Zealand can adjust its income tax framework to make the system fairer.

According to Robertson, the cross-border digital services market in New Zealand is worth around $2.7 billion. A revamp to the digital services tax system could bring in between $30 million to $80 million in revenue.

He notes that ‘highly digitalised companies’ such as social media networks, online advertising, and trading platforms earn money off Kiwis without having to pay income tax – and that needs to change.

“That is not fair, and we are determined to do something about it,” says Robertson.

Amongst other large digital corporates such as Facebook and Google, Apple is one tech firm that has been outed for not paying taxes in New Zealand. While that is not illegal, new tax changes would mean that Apple will finally have to support New Zealand fair and square.

“The current tax rules also provide a competitive advantage to foreign companies in the digital services field compared to local companies who offer e-commerce, online advertising, and social networking services.”

International tax systems have been slow to keep up with modern business, particularly with technology and digital services rising to become large empires quickly. That lack of pace is costing revenue and fairness in the tax system.

Revenue Minister Stuart Nash adds that New Zealand is working within the OECD to find an internationally-agreed way to include the digital economy in tax frameworks.

“Our preference is to continue working within the OECD, which was also recommended last year by the interim report of the Tax Working Group. However, we believe we need to move ahead with our own work so that we can proceed with our own form of a digital services tax, as an interim measure, until the OECD reaches agreement.”

Australia is using a similar approach to introduce a digital services tax. It released a discussion document last year.

“The OECD has also released a discussion document on its proposals. Officials will now finalise the New Zealand document which is likely to be publicly released by May 2019,” says Nash.

“The document will make it clear we are determined that multinational companies pay their fair share of tax. We are committed to finding an international solution within the OECD but would also consider an interim option till the OECD finalises a position.”

Link image
Virtual demo: Diagnose network cabling problems with the LinkIQ Cable+Network Tester
If you’re finding it difficult to install access points and cabling, or if you can’t pinpoint an issue with a video camera or end user, the LinkIQ Cable+Network Tester could be exactly what you need. Try a free, fully interactive demo now.More
Story image
Addressing the challenges of least privilege access
Enforcing the right privilege policies across the environment with the right visibility and observability will ensure that the policy mandates hold tight against any behaviour changes.More
Story image
Why organisations should rethink the approach to retail demand planning and forecasting
Why organisations should rethink the approach to retail demand planning and forecastingMore
Story image
Mobile devices biggest enterprise security threat - report
Businesses have left themselves vulnerable and open to cyber criminals in the rush to ensure their workforce could operate remotely during the Covid-19 pandemic.More
Story image
Kroll completes Redscan acquisition, expands cyber risk portfolio
With the addition of Redscan and its extended detection and response (XDR) enabled security operations centre (SOC) platform, Kroll expands its Kroll Responder capabilities to support a wider array of cloud and on-premise telemetry sources.More
Story image
rhipe acquires emt Distribution, with aim to expand into enterprise market
The acquisition will enable rhipe to deliver a comprehensive portfolio of end-to-end security capabilities to its partners, the company says.More