Prime Minister Jacinda Ardern has defended the decision to investigate implementing a new digital services tax (DST), saying it's the right thing to do.
Ms Ardern announced during Monday's post-cabinet press conference a discussion document about taxes companies such as Facebook and Google should pay will be released in later in 2019.
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Finance Minister Grant Robertson said in a statement at the same time the tax would target "highly digitised companies" such as social media networks and online advertising.
"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."
Mr Robertson said cross-border digital services are worth around $2.7 billion in New Zealand.
Ms Ardern told The AM Show on Tuesday New Zealand was following the lead of several other countries.
"Internationally, you'll see that there's very specific forms of tax being developed and designed to deal with, especially, a growth in a part of the economy that our tax systems aren't designed to deal with."
International taxes tend to be around 2 to 3 percent and based on turnover, that's the kind of tax the Government will look into, Ms Ardern said.
She said it's important for the Government to look into the tax to make sure tax system is balanced and fair.
It's not fair to say corporations will pull out because of the tax though.
"Some [companies] have even said 'look, we will follow the law of the land', so any scaremongering around the fact that we might lose these services I would dismiss.
"We're not alone in this, Australia is currently looking at exactly the same thing as is the UK, as is Austria, as are a number of European countries, Germany and so on.
"This is the right thing to do."
PWC tax expert Geof Nightingale told The AM Show New Zealand could implement a DST, but it comes with "potential hazards".
"There's always a risk whilst we might collect the tax from the multinationals the economic burden of it shifts to the consumer through the pricing," he said.
There's evidence of this happening in the past with previous taxes, and Mr Nightingale said it would be a risk.
"There was a bit of evidence that happened when we put GST onto digital services in October 2016, some of the companies changed their prices and some didn't.
"It's not clear, but that is a risk that this tax could [have]."
Victoria University tax expert John Shewan had the same sentiments, and told Newshub the devil will be in the detail.
"It may well be is those companies simply pass that back to the New Zealand users so the tax ends up actually being borne by New Zealanders, so that's a big issue."