CAB-19-MIN-0041 – Minute: Options for taxing the digital economy

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Options for Taxing the Digital Economy

Portfolios Finance / Revenue

On 18 February 2019, Cabinet:

1 noted that the government is considering measures recommended by the Tax Working Group to improve the New Zealand tax system;

2 noted that there is a problem with the current taxation of the digital economy, both in New Zealand and internationally;

3 noted that a number of countries, including Australia, are investigating or implementing digital services taxes (DSTs);

4 agreed that New Zealand should continue to participate in the OECD discussions on the taxation of the digital economy, with a view to supporting a long-term solution (bearing in mind its effect on New Zealand exporters);

5 agreed that the government should also actively consider a possible DST as an option for taxing the digital economy, in case the OECD are unable to achieve sufficient progress in 2019;

6 directed officials to draft a discussion document to get public feedback on the options for taxing the digital economy (being the international solution and the DST);

7 agreed that the discussion document should state that:

7.1 the government is determined to ensure that multinational companies pay their fair share of tax in New Zealand;

7.2 the government is actively considering introducing a DST in advance of an international solution. While New Zealand is committed to finding a solution at the OECD, if sufficient progress is not made in 2019, a DST is a credible option;

7.3 the government sees real benefits in aligning New Zealand’s position on a DST with Australia;

7.4 the DST initially proposed would be like the one proposed by the United Kingdom;

7.5 the DST would be an interim measure that would cease to apply once an international solution was adopted;

7.6 the government would aim to design the DST so that it was consistent with New Zealand’s international obligations (which is expected to be possible);

8 authorised the Prime Minister, Minister of Finance and the Minister of Revenue to decide when the discussion document will be released;

9 noted that the Minister of Finance and the Minister of Revenue, in consultation with the Prime Minister, will report back to Cabinet with a draft of the discussion document prior to its release.

Michael Webster
Secretary of the Cabinet

Hard-copy distribution:
Prime Minister
Deputy Prime Minister
Minister of Finance
Minister of Revenue