She couldn’t make capital gains tax work. She has promised no personal tax increases during this term. She has announced a massive spending programme and is facing the likelihood of falling surpluses – not that she will ever admit it. So what is a poor girl to do? Answer: hit those evil, rich multinationals. No one in New Zealand will care. Everyone thinks they don’t pay enough tax anyway, so there will be no consequences either way.
Yes, “Make the big guys pay their fair share” is a popular slogan, heard over and over again at election times. We heard it in Australia. We hear it here. We hear it every time someone is trying to win power. Yet somehow, nothing ever changes. Why is that?
The government has released details of how it intends to tax large online multinational companies like Facebook, Google, Uber and Airbnb.
The Digital Services Tax discussion has now been made public and is now open to consultation.
It would include companies such as Facebook, Uber, YouTube and Airbnb.
Options to be considered include a flat digital service tax, which would also apply to some New Zealand companies.
The OECD is already considering two solutions, which will also be part of the government’s consultation plan.
Prime Minister Jacinda Ardern said stopping using multi-national companies like Facebook isn’t going to solve the issue of them not paying their fair share of tax.
Without turning us into a communist state (an option that would delight Jacinda no end), the government cannot stop us from using Facebook. We are not just talking about Facebook anyway, although that seems to be Jacinda’s focus. Could it be because a certain terrorist uploaded his awful video on Facebook? Don’t worry, Jacinda – there are plenty of other options for livestreaming.
An international response to multinationals not paying a fair amount of tax was the preference, but in the meantime, New Zealand was doing its own work, Ms Ardern said.
“Either we can cease to use a form of advertising that, actually, a large number of New Zealanders would see when it comes to communicating information that is relevant to them, or we can actually make sure that these multinationals pay their fair share of tax.”
RNZ.
Herein lies the problem. If the government decides to just go ahead and impose New Zealand taxes on these companies, they will probably pull out of New Zealand, and the voting public will not be particularly happy. These companies are subject to international tax rules, and as far as we know, pay all taxes due under those rules. It reminds me of the supposed special tax breaks that the media constantly claimed were given to landlords. There were no special tax breaks, but that never stopped the media from claiming that there were.
In moving away from the international tax rules, Jacinda would run the risk that our own companies might be treated similarly in other countries, in a tit-for-tat move. Why she would want to risk our own companies being subject to rogue tax rules is beyond belief.
She doesn’t understand this, of course. She just thinks it sounds good to be getting heavy on those big international companies that are bleeding us dry and are causing poverty to our children. It is always easy to grandstand towards a huge multinational company. They call it ‘truth to power’, except that here we are missing the ‘truth’ bit.
The fact is that Facebook, Google and the others pay most of their taxes in their country of residence, which is the USA. Overseas branches pay tax according to the international tax rules, and that, unfortunately, is that.
I predict that nothing will happen. Jacinda is just grandstanding. But remember, her knowledge of international tax rules is non-existent, so she is quite capable of bungling this matter well and truly. Where that will leave our own big companies that earn millions in export dollars and pay most of their taxes in New Zealand… well, time will tell.
