Sign up for tax alert emails    GTNU homepage    Tax newsroom    Email document    Print document    Download document

February 26, 2019
2019-5275

New Zealand announces proposal to implement Digital Services Tax

Executive summary

The New Zealand Government has signaled its plan to consult on the introduction of a Digital Services Tax (DST). While specific details have not been announced, a discussion document will be released in May 2019 for public consultation. Revenue Minister Stuart Nash has indicated that the DST could be implemented in 2020.

Detailed discussion

Background

The New Zealand Government has set up an independent panel (the Tax Working Group or the Group) to review the New Zealand tax system. In its interim report to the Government,1 the Tax Working Group recommended that New Zealand continue to participate in the multilateral discussions at the Organisation for Economic Co-operation and Development (OECD) on the future of the international income tax framework. The Group further recommended that New Zealand be ready to implement a DST as an interim measure should there be a critical mass of other countries moving in that direction (particularly Australia) and if it could be sure that the cost would not simply be passed onto consumers.

Several other countries have announced their intention to pursue a DST since the interim report. Further, Australia has since released a discussion paper on the digital economy and its corporate tax system.

Announcement

On 18 February 2018, the Government announced plans to consult on updates to the tax rules to target ”highly digitalized companies” that earn income in New Zealand.2 The Government intends the DST to be an interim measure until wider agreement in the OECD has been reached on the international income tax framework.

Potential design

Specific design features of the tax have not been provided but approach will be drawn from proposals in other jurisdictions and the European Commission. The Prime Minister Jacinda Ardern has indicated that a 2% to 3% tax based on turnover will be a model under consideration.3 Initial forecasts put the potential revenue at NZ$30m4 to $80m, depending on the final design.

Who will be impacted?

The Government has declined to comment on specific companies that may be impacted by the potential DST. However, in the announcement, the Finance Minister Grant Robertson acknowledged that “highly digitalized companies, such as those offering social media networks, trading platforms, and online advertising” may be impacted.

Next steps

  • A discussion document will be issued in May 2019 inviting public comment.
  • There will be further opportunities for comment during the legislative process should legislation be proposed.

Endnotes

1. https://taxworkinggroup.govt.nz/resources/future-tax-interim-report.

2. https://www.beehive.govt.nz/release/making-sure-multinationals-pay-their-fair-share.

3. https://www.newshub.co.nz/home/politics/2019/02/digital-services-tax-right-thing-to-do-jacinda-ardern.html.

4. Currency references in this Alert are to NZ$.

For additional information with respect to this Alert, please contact the following:

Ernst & Young Limited, Auckland
  • Matthew Hanley, New Zealand Tax Leader | matthew.hanley@nz.ey.com
  • Paul Smith, Indirect Tax | paul.smith@nz.ey.com
  • Dean Madsen, International Tax Services | dean.madsen@nz.ey.com
Ernst & Young Limited, Wellington
  • David Snell, New Zealand Tax Policy Leader | david.snell@nz.ey.com

ATTACHMENT

 
 

The information contained herein is general in nature and is not intended, and should not be construed, as legal, accounting or tax advice or opinion provided by Ernst & Young LLP to the reader. The reader also is cautioned that this material may not be applicable to, or suitable for, the reader's specific circumstances or needs, and may require consideration of non-tax and other tax factors if any action is to be contemplated. The reader should contact his or her Ernst & Young LLP or other tax professional prior to taking any action based upon this information. Ernst & Young LLP assumes no obligation to inform the reader of any changes in tax laws or other factors that could affect the information contained herein.

 

Copyright © 2024, Ernst & Young LLP.

 

All rights reserved. No part of this document may be reproduced, retransmitted or otherwise redistributed in any form or by any means, electronic or mechanical, including by photocopying, facsimile transmission, recording, rekeying, or using any information storage and retrieval system, without written permission from Ernst & Young LLP.

 

Any U.S. tax advice contained herein was not intended or written to be used, and cannot be used, by the recipient for the purpose of avoiding penalties that may be imposed under the Internal Revenue Code or applicable state or local tax law provisions.

 

"EY" refers to the global organisation, and may refer to one or more, of the member firms of Ernst & Young Global Limited, each of which is a separate legal entity. Ernst & Young Global Limited, a UK company limited by guarantee, does not provide services to clients.

 

Privacy  |  Cookies  |  BCR  |  Legal  |  Global Code of Conduct Opt out of all email from EY Global Limited.

 


Cookie Settings

This site uses cookies to provide you with a personalized browsing experience and allows us to understand more about you. More information on the cookies we use can be found here. By clicking 'Yes, I accept' you agree and consent to our use of cookies. More information on what these cookies are and how we use them, including how you can manage them, is outlined in our Privacy Notice. Please note that your decision to decline the use of cookies is limited to this site only, and not in relation to other EY sites or ey.com. Please refer to the privacy notice/policy on these sites for more information.


Yes, I accept         Find out more