Submission to the New Zealand Inland Revenue Consultation on Options for Taxing the Digital Economy

IGEA has made a submission to the New Zealand Inland Revenue’s consultation on options for taxing the digital economy.

IGEA’s submission made the following arguments:

• The case for a digital services tax has not been made, noting that taxation questions related to scale without mass, user value creation and intangible assets are not unique to digital businesses but are increasingly relevant across a range of traditional non-digital industries
• The implementation of a digital services tax will be complex, with revenue-based taxation likely to be problematic and carry a range of risks from double-taxation and significant compliance costs to impacts on investment and consumers (all, by admission, without attracting significant tax revenue)
• Reform of the international tax system through multi-lateral arrangements is the only genuinely workable path ahead, with a ‘go alone’ digital service tax likely to hinder progress on a global solution as well as endanger New Zealand’s trade relationships in a volatile global trade environment
• Digital game content are not purely digital goods, are economically-valuable products that do not rely on user-created value, are already subject to a range of tax integrity rules, and already attract New Zealand GST
• Digital game storefronts are not intermediation services but are often simply digital and highly curated extensions of physical game stores, with the added difference that they also invest heavily into developing and selling their own hardware and software
• There are significant, practical considerations around the taxation of online advertising and user contributions and their impact on New Zealand businesses that have not been answered, including how a digital services tax would deal with companies with blended traditional and digital business models