NZ set to dodge google tax bullet

10 October 2019

Key points:

• OECD momentum is building towards consensus on digital tax

• NZ firms likely to avoid capture but compliance costs remain a concern

• Progress suggests no need to rush to adopt a go-it-alone DST

The OECD secretariat’s preferred approach to tackle digital taxation for consultation is good news for New Zealand businesses with most, if not all, likely to avoid being directly caught in international tax changes designed to deal with digitalisation of the international economy.

Extractive industries have been excluded from the OECD’s proposals released today, and it looks likely that commodities will also be excluded.

“Realistically this tax is seeking to tax only the largest of businesses worldwide,” said John Cuthbertson, New Zealand Tax Lead for Chartered Accountants Australia and New Zealand.

“As proposed by the OECD, large US tech companies (particularly F.A.A.N.G – Facebook, Amazon, Apple, Netflix and Google) are likely to return more tax in the countries that use their services in exchange for enhanced tax certainty.”

He said there are still areas of the proposals where New Zealand needs to work with the OECD to minimise harm to our exporters, such as managing the compliance costs of the policy.

“That’d be the case even if our exporters are not captured by the tax.”

Regarding the future of New Zealand’s go-it-alone digital services tax, Cuthbertson said that, given the amount of progress at the OECD, and the risks of a go-it-alone DST, the Government should defer consideration of the proposed DST till after the G20 meeting in late 2020. CA ANZ remains of the view that a unilateral DST is not in the best interests of New Zealand.

“Work on a multilateral solution is progressing,” Cuthbertson said. “The intention is for the proposal to be presented for endorsement by the 130 countries taking part in the OECD/G20 Inclusive Framework in January 2020.

“The aim is to improve the coherence of international tax rules and ensure a more transparent tax environment. We then expect to see most of the detailed policy work completed for the G20 meeting in late 2020.”

Cuthbertson said “the document released today suggests the US is engaged and is now driving the design of the policy.

“It’s looking increasingly likely that countries that ultimately adopt these measures face an ‘all or nothing’ arrangement and the details of the proposals won’t be able to be cherry picked.

“Consumer-facing businesses will be captured under the proposals even if they are using a distributor to bring goods into a country.”

More information

The OECD Secretariat proposal - http://www.oecd.org/tax/oecd-leading-multilateral-efforts-to-address-tax-challenges-from-digitalisation-of-the-economy.htm

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