- Taxing the digital economy on the international stage
- Heartening to note that several EU member countries also share NZ’s concerns
Sound tax administration is key
Late last month, as terms for Brexit were discussed and France revolted over fuel tax increases, Tax Directors of 10 institutes and 11 countries gathered in Brussels for the 8th international meeting of the GAA Tax Director Group to develop thought leadership on tax issues globally and in their home countries. A common theme arising from the meeting was the decline in standards of tax administration and the issues arising from this. Good tax administration and tax policy implementation are fundamental to an effective tax system. The group has agreed to undertake further work identifying common issues and best practice.
The Digital Economy
As borders are shifting (and possibly returning) the approach to the Digital Economy took center stage across many of the sessions. The GAA Tax Directors Group had the opportunity to meet with five Irish MPs to the EU, and separately with the Irish Permanent Representation at the EU (the equivalent of a consulate) and discussed the proposals to introduce a Digital Services Tax in the EU. New Zealand has of course recently introduced further proposals to collect and return GST on low value goods supplied to New Zealand consumers from offshore suppliers, on the back of the “Netflix Tax” which came into effect on 1 October 2016 for online services. Australia has recently finished consultation on the Digital Economy and Australia’s Corporate Tax System.
It was heartening to note that several EU member countries also share our concerns regarding the potential retaliatory impacts that may result for relatively little fiscal gain if countries unilaterally try to ‘go it alone’ with such a tax. Following the meeting, the Economic and Financial Affairs Council has taken the digital services tax off the ‘EU table’ for now. If a decision to proceed hasn’t been reached by March next year, France have indicated they’ll proceed alone.
New Zealand is a significant commodity exporter and once the principles of a digital services tax are established it would not take much for these to be extended to capture, and subject to tax, our key commodity exports in the countries in which those commodities are consumed. This approach also risks double taxation as a foreign tax credit would not be available.” CA ANZ expressed its concerns as to how the “international tax pie” is divided as part of our submission to the Tax Working Group’s interim report earlier this year.
Current Tax Climates
All members presented updates on the current tax climate in their own jurisdictions, the Tax Working Group’s deliberations in New Zealand was a particularly timely topic as the Canadian Accounting Member Body (CPAC) are currently calling for a reform of their tax system and are looking to the New Zealand experience with interest.
These meetings are invaluable to support knowledge sharing between jurisdictions and the level of transparency in the discussions are becoming increasingly important as the tax world continues to adapt to a global market. By the time the Group meets in 2019, Brexit - in one form or another - will have happened, the Tax Working Group final report will be published, and consultation may have started on its recommendations, and GST on online low value goods will be a few short months away.