New Zealand announced on Tuesday its intention to implement a digital-services tax on large multinational corporations starting in 2025. This move comes in response to the slow progress of international tax rule reforms that were agreed upon in 2021. The global tax accord aims to reshape the taxation of multinational companies across the globe. Despite a recent one-year delay in the accord’s first phase, New Zealand’s Finance Minister Grant Robertson stated that the nation would not wait indefinitely for progress.
“We will keep working to support a multilateral agreement, but we are not prepared to simply wait around until then to find out,” Robertson explained. To prepare for the potential failure of the Organization for Economic Cooperation and Development (OECD) process, New Zealand plans to introduce legislation for the proposed tax later this week.
In contrast to New Zealand’s approach, Canada is set to impose a digital-services tax from the beginning of 2024. Canadian lawmakers have expressed their reluctance to extend the pause on digital taxes. Currently, multinational tech companies can operate globally and channel their profits to low-tax jurisdictions, resulting in minimal taxation in the countries where their users are located.
New Zealand’s proposed tax would levy a 3% fee on multinationals earning over 750 million euros (US$812 million) annually from global digital services. Additionally, companies making 3.5 million New Zealand dollars (US$2.1 million) or more a year from providing digital services within New Zealand would also be subject to the tax. The focus of the tax would be on entities profiting from New Zealand users of social media platforms, online marketplaces, and internet search engines. If implemented, this tax could generate around NZ$222 million over a four-year period.
