Date posted: 24/07/2019 3 min read

Submission - Options for taxing the digital economy

CA ANZ submitted to Government that the risks inherent in a digital services tax outweigh any possible tax revenue.

Digital processes and digitalisation are so interwoven into modern business that there is little to differentiate the ‘digital economy’ from the economy. In June, Government sought feedback on two options to address the tax challenges posed by the modern economy. 

First, whether to implement a NZ digital services tax (DST) on certain digital transactions. Secondly, whether to continue to work with the OECD to form a multilateral approach to developing the current international tax rules.

"Any OECD consensus on the reallocation of international taxing rights is likely to apply for the next fifty years or more. the digital services tax discussion distracts from these far more important discussions."

CA ANZ does not support the introduction of a unilateral digital services tax (DST). A temporary digital services tax is likely to impact the New Zealand tax base and consumers in the short term (five – ten years). 

Any OECD consensus on the reallocation of international taxing rights is likely to apply for the next fifty years or more. As such, the digital services tax discussion distracts from these far more important discussions happening at the OECD. New Zealand’s finite resources need to be applied there and not misdirected at implementing the DST.

There is a global political drive to reach a multilateral solution, however this will require careful negotiation and time. Many jurisdictions who were considering a unilateral measure are now solely committed to working within the interim framework. 

The reimagining of international taxing rights will create winners and losers. New Zealand must undertake its own research and analysis of what the worst-case scenarios could imply. There is a real need to be strategic and to align ourselves with similar smaller exporting nations to ensure that our voice is heard.

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