The Asia Internet Coalition (AIC) has submitted comments on the Government Discussion Document on Options for taxing the digital economy to the Ministry of Finance, The Ministry of Revenue, and the Government of New Zealand Personal. We commend the government’s efforts on developing the Discussion Document, with an aim to build a productive, sustainable and inclusive economy, while at the same time supporting a sustainable revenue base to fund improvements to the wellbeing of New Zealanders and their families. This means it is important for everyone to pay their fair share of tax in New Zealand.
We also understand that there has been significant international concern over the perceived under- taxation of the digital economy, and digital multinationals in particular. It has been argued that this under-taxation is mostly caused by deficiencies in the current international tax rules, which have not kept up with digitalisation and other modern business developments. While the Discussion Document canvases the possibility of an interim digital services tax (DST) that will apply to certain digital transactions, in our view the Government of New Zealand would be better served devoting its efforts to formulating an internationally agreed solution at the OECD to update international tax rules to account for the challenges presented by the rapid digitalization of the economy. Further, the OECD and the EU Expert Group have both looked at the idea of a tax targeted at digital and agree that it is the wrong approach. We therefore believe that the wider impacts, in terms of reputational damage of the New Zealand as an open digital economy, and the chilling effect the tax may have on investment and the risk of retaliatory measures from other countries, will have long term negative consequencesfor the country’s tech sector.