Global digital giants Google and Facebook may face surprise New Zealand tax

Wellington, February 18: Highly digitalized companies, such as those offering social media networks, trading platforms, and online advertising, currently earn a significant income from New Zealand consumers without being liable for income tax.

Prime Minister Jacinda Ardern has now confirmed the move. Says the move is about "fairness and balance in the tax system". She revealed Cabinet had agreed to issue a discussion document about how to update New Zealand's tax framework to ensure multinationals pay their fair share of tax.

"Highly digitalised companies, such as those offering social media networks, trading platforms, and online advertising, currently earn a significant income from New Zealand consumers without being liable for income tax. That is not fair," Ardern said, adding that the Government is determined to do "something about it".

The move follows the introduction of a similar tax in France. The proposed tax in France is a levy on all internet direct sales, advertisements and the sale of private data.

Similar measures are being discussed by the European Union and the United Kingdom, but limited to online advertising. Proposed levies have ranged between 2 and 3 per cent of annual revenues.

The issue is multinational companies selling goods or services online and then running profits through low-tax countries.

"That is not fair," Ardern said, adding that the Government is determined to do "something about it".

She said the current tax system was not sustainable and it's a gap this government thinks should close.

She said a number of other countries are looking at similar taxes, such as Australia and certain European countries. International tax rules have not kept up with modern business, Revenue Minister Stuart Nash said.