Government eyes tax on digital platforms like Uber, Instagram.

The options for the proposed digital services tax (DST) have been released, with the government intending to “ensure offshore digital companies no longer enjoy tax breaks which aren’t available to local businesses”.

Finance Minister Grant Robertson said the proposed tax would apply to outlets like Uber, AirBnb, Facebook, YouTube and Instagram.
“A DST would be narrowly targeted at certain highly digitalized business models. It’d not apply to sales of products or services, however to digital platforms that rely upon a base of users for financial gain from advertising or information,” he said.

Currently, the OECD is discussing an internationally agreed solution, “however if the OECD cannot make adequate progress this year we need an interim solution”, Mr. Robertson said.

“Modern business practices, digitalization particularly, means that a corporation can be significantly involved in the economic life of a country without paying tax on income or turnover,” Mr. Robertson said.

New Zealand’s cross-border digital services are estimated to be $2.7 billion, which means a DST could bring in $30 million to $80 million.
A DST would be repealed if the OECD came up with an international solution.

Two options for the tax are:
• changing the current international income tax rules, the option being discussed by the OECD and the G20 group of huge economies.
• Applying a separate DST of 3 per cent to certain revenues earned by highly digitalized multinationals operating in New Zealand.

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