Prime Minister Jacinda Ardern has announced plans to impose a new digital services tax (DST) on multinational companies operating in New Zealand.
On Monday, she told media that Cabinet has agreed to progress work on how to ensure these businesses pay their "fair share" of tax. A discussion document will be issued about how to update our tax framework.
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"Highly digitalised companies, such as those offering social media networks, trading platforms, and online advertising, currently earn a significant income from New Zealand consumers without being liable for income tax," says Finance Minister Grant Robertson.
"That is not fair, and we are determined to do something about it.
"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."
According to Mr Robertson, cross-border digital services are worth around $2.7 billion in New Zealand.
Overseas taxes are charged at around 2 to 3 percent on the gross revenue earned by a multinational company in that country. In New Zealand, this would raise between $30 million and $80 million depending on how it is designed, Mr Robertson says.
"The document will make it clear we are determined that multinational companies pay their fair share of tax," says Revenue Minister Stuart Nash.
"We are committed to finding an international solution within the OECD, but would also consider an interim option 'til the OECD finalises a position."
A number of countries - including the UK, Spain, Italy, France, Austria and India - have enacted or announced a DST.