The development is in line with those of other countries who are aiming to bring large multinational companies within the ambit of their tax net.
On Monday, in a significant development, New Zealand disclosed it aims to update its laws in order to tax the earnings of multinational tech companies, including Facebook, Amazon.com, Google.
The development extends global efforts to bring large tech companies within the ambit of their tax net.
New Zealand’s Prime Minister, Jacinda Ardern, stated the cabinet has agreed to issue a discussion document on “how to update the country’s tax framework to ensure multinational companies pay their fair share.”
“Our current tax system is not fair in the way it treats individual tax payers, and how it treats multinationals,” said Ardern t reporters at her weekly post-cabinet news conference.
Currently, digital companies, including social media networks, online advertising firms, trading platforms, who earn sizeable income from New Zealand are not liable to pay a sizeable portion of their income tax, said the government in a statement following the announcement.
The total amount of the cross-border digital services in New Zealand is estimated to be around $1.86 billion (NZ$2.7 billion).
New Zealand expects to garner between NZ$30 million to NZ$80 million if it were to impose digital services tax on these tech giants, said New Zealand’s Finance Minister Grant Robertson in a statement.
Digital services taxes (DST) are generally charged at a flat rate of two to three percent on the gross revenue earned by a multinational company in that country.
A number of countries across the globe including, India, France, Spain, Italy have enacted or have announced plans for a DST.
The European Union and Australia are also consulting on a DST.
New Zealand is likely to publicly release its stance on the matter by May 2019.
($1 = 1.4526 New Zealand dollars)