Digital Services Tax options

The Herald reports:

Internet giants like Google and Facebook could soon be paying more tax in New Zealand as the Government moves to take submissions on a “digital services tax”.
A digital services tax would apply to digital revenues created in New Zealand, whether that be through social media platforms, content sharing sites like YouTube, companies advertising online and e-commerce sites that facilitate the sales of goods and services such as Airbnb, Uber and eBay.
In February Cabinet agreed to investigate a new tax on multinational companies targeting digital revenues. Today, Finance Minister Grant Robertson and Revenue Minister Stuart Nash have announced two proposed options to ensure offshore technology companies no longer enjoy tax breaks.
Government is proposing to change the current international income tax rules to allow more taxation in market countries. A similar option is currently being discussed by the OECD and the G20 group of economies.

The second option is to apply a digital services tax of three per cent to revenues earned by highly digitalised multinationals operating in New Zealand.

A 3% tax on revenue is a very bad idea. It is arbitrary and will probably breach some of our tax treaties.

Think if Xero got whacked by a 3% revenue tax by the UK, because it has UK customers. Xero went many years not making a profit as it was growing the company. A 3% revenue tax may have crippled it.

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