Government Decision To Abandon Proposed Digital Services Tax Disappointing - Better Taxes

The decision by the Government to abandon the proposed Digital Services Tax has been described as very disappointing by the Better Taxes for a Better Future campaign, raising questions about how the Government intends to fill the revenue gap left by this move. It also raises questions about how the Government will ensure digital services companies are paying a fair rate of tax on their earnings in New Zealand.

The Digital Services Tax Bill, which was introduced by the previous Labour Government has been sitting on Parliament’s order paper since August 2023. It would have instituted a 3% tax on digital services revenue earned from New Zealand customers by large digital services companies. Treasury had already included the revenue from the proposed tax in its latest forecasts and estimated it would contribute $479m between 2027 and 2029.

“We need to know how the Government intends to plug the $479m revenue gap left by their decision to drop the Digital Services Tax, at a time when our public services, particularly health, are in crisis because of underfunding,” says Glenn Barclay spokesperson for the Better Taxes campaign.

“The digital economy has proven very difficult to tax and the absence of a digital services tax has allowed multi-national tech companies to avoid paying their fair share of tax in Aotearoa New Zealand.”

“Around 18 countries already operate digital services taxes, and while the American administration doesn’t like them, we are not aware of any countries repealing these laws in response to threats from the Trump administration,” says Glenn Barclay.

“Instead of giving in to such threats,the Government should have proceeded with the Bill, or at the very least left it on the Parliamentary Order Paper until it could be implemented or an alternative developed.”

“If the Government is stepping away from the Bill then we need to know how it intends to progress the taxation of multi-national tech companies in this country, to ensure that these companies contribute to this country, rather than just exploiting their privileged position.” says Glenn Barclay.

“We don’t share the Minister’s optimism about an enforceable agreement on minimum corporate tax rates at the OECD in the medium term in the face of opposition from the Trump Administration. New Zealand needs another solution.”

“In addition it leaves another big question mark over how the Government will ensure advertising-dependent news local media will survive when their news and advertising is being taken by the social media giants who don’t pay a fair rate of tax,” says Glenn Barclay.

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