IR2019/038 | T2019/171 – Tax policy report: Options for taxing the digital economy - Cabinet paper

Date 29 January 2019
Reference T2019/171
IR2019/038
Document type Tax policy report
Title Options for taxing the digital economy
Downloads PDF (220 KB; 3 pages)
DOCX (73 KB; 3 pages)
Contents

Tax policy report: Options for taxing the digital economy


Date: 29 January 2018 Priority: Medium
Security level: In Confidence Report number: T2019/171
IR2019/038

Action sought

  Action sought Deadline
Minister of Finance Advise officials of any desired changes to the Cabinet paper or the proposed redactions 1 February 20198
Minister of Revenue Advise officials of any desired changes to the Cabinet paper or the proposed redactions 1 February 2019

Contact for telephone discussion (if required)

Name Position Telephone
Sam Rowe Senior Policy Advisor, Inland Revenue [Withheld under section 9(2)(a) of the Official Information Act 1982]
Matthew Gan Tax Specialist, The Treasury

29 January 2019

Minister of Finance
Minister of Revenue

Options for taxing the digital economy – Cabinet paper


1. On 13 December 2018 we provided you with a tax policy report on options for taxing the digital economy (T2018/3710, IR2018/801). That report recommended the preparation of a Government discussion document on the different options, including a digital services tax. The recommendation to prepare a discussion document requires approval by Cabinet.

2. We provided you with a first draft of the Cabinet paper requesting approval to prepare the discussion document on 25 January. Following feedback from you and your offices, we now attach an updated draft of the Cabinet paper. We also attach a version of the Cabinet paper showing the redactions we propose to make to it for its proactive release. Please let us know by Friday 1 February 2019 if you would like any changes made to this draft or the proposed redactions.

3. Since we reported to you in December, the OECD has agreed to consider another proposal for taxing the digital economy. This proposal seems to provide for formulary apportionment of a multinational’s profit to market countries, based on certain metrics such as sales and user participation. The proposal would require the multinational to have a significant economic presence in the country (which need not be physical) and could involve withholding taxes. [Withheld under section 6(a) of the Official Information Act 1982] We have included this proposal in the Cabinet paper.

4. The next steps are set out in the table below.

Step Date
Your directions on any changes you would like made to the Cabinet paper or the proposed redactions 1 February 2019
Cabinet paper lodged 7 February 2019
Cabinet paper to DEV Committee 13 February 2019
Cabinet paper to Cabinet 18 February 2019
Draft discussion document provided to you for approval [Withheld under section 9(2)(f)(iv) of the Official Information Act 1982]
Draft discussion document provided to Cabinet for approval
Discussion document released to public

Recommended action

5. We recommend that you:

(a) Review the attached Cabinet paper and advise us if you would like any changes made prior 1 February 2019.

Agreed/Not agreed Agreed/Not agreed

(b) Review the proposed redactions to the Cabinet paper and advise us if you would like any changes made prior 1 February 2019.

Agreed/Not agreed Agreed/Not agreed

Matt Cowan
Team Leader
Tax Strategy Team
The Treasury

Sam Rowe
Senior Policy Advisor
Policy and Strategy
Inland Revenue

Hon Grant Robertson
Minister of Finance
/ /2019

Hon Stuart Nash
Minister of Revenue
/ /2019