February 18, 2019
New Zealand Feb. 18 joined the European Union and Australia in seeking to tax Internet behemoths such as Amazon, Google and Facebook on revenue generated within its border.
Prime Minister Jacinda Ardern made the announcement in a post-cabinet press conference.
The proposed 2% to 3% tax would apply to any purchases and services sold by Internet firms regardless of their actual physical presence in the country.
“Some companies can do significant business in New Zealand without being taxed for the income they earn,” Ardern said. “This is not fair, and this is not sustainable.”
Indeed, Google’s subsidiary in New Zealand reportedly paid $393,000 in taxes in 2017 despite generating hundreds of millions in revenue.
The government said the tax could generate upwards of $55 million in additional annual revenue.
“Our current tax system is not fair in the way it treats individual tax payers, and how it treats multinationals,” said Ardern.
The move by New Zealand mirrors efforts in the United States by individual states such as South Dakota, which had its e-commerce tax lawsuit against online furniture retailer Wayfair reached the U.S. Supreme Court.
The high court last summer ruled states could charge taxes on companies doing business in the state without an actual physical presence.
A Georgia lawmaker this month proposed legislation seeking to tax digital entertainment services such as Netflix and Spotify 4% in an effort to compensate for declining pay-TV taxes statewide.
Such a user tax currently exists in Hawaii, Washington and Pennsylvania.