ANALYSING NEW ZEALAND’S DIGITAL SERVICES TAX PROPOSAL

Abstract
The allocation of taxing rights for cross-border digital profits is a critical issue for the 21st century. The New Zealand government has responded with a discussion document proposing a digital services tax as an interim measure. Given the lack of global consensus on solutions for the issue, a digital services tax is a serious possibility. This article examines the government’s proposal.

The proposal’s rationale is based on active contribution, which is conceptually weak and contains several interpretative issues. The proposal fails to distinguish between traditional businesses and highly digitalised businesses (‘HDBs’) and, as a result, business activities of traditional businesses are, theoretically, in scope. However, high de minimis thresholds ensure that only large HDBs are liable.

Fundamentally, there is a lack of evidence that HDBs are paying tax at a lower effective rate than other businesses. Given this, it is strange that an international effort has been made to tackle HDBs. Furthermore, this unilateral approach could dangerously reduce multilateral cooperation in tax matters.

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THE TAX WORKING GROUP AND CAPITAL GAINS TAX IN NEW ZEALAND — A MISSED OPPORTUNITY?

Abstract

There has been much debate in New Zealand concerning the need for a separate and comprehensive capital gains tax (‘CGT’), especially after the appointment of the Tax Working Group (‘TWG’) in 2017. The arguments for a CGT include equity, base broadening, certainty, additional tax revenues and remedying the housing affordability crisis. On the other hand, counter-arguments such as tax complexity (in the design of the CGT), overstatement of projected tax revenues, and high tax compliance and administrative costs have been raised by opponents of the tax. The TWG identified three socio-economic challenges facing New Zealand (among others) — housing affordability, income/wealth inequality and fiscal sustainability — all of which it is argued have a link to the tax system. Ultimately, for political reasons the government decided not to pursue the TWG’s recommendation for a CGT. This paper considers whether this is a lost opportunity to address these three challenges.

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WOMEN AND THE TAX WORKING GROUP

Abstract

The impact of the tax system on women and men is not the same. Women earn less than men, have lower levels of savings, and derive more of their income from wages than wealth. This means that progressivity is particularly important for women, and the taxation (or non-taxation) of savings and capital is particularly relevant to men.

To provide a basis for discussion of the way in which the New Zealand government’s Tax Working Group (‘TWG’) was invited to consider the issue of gender, and how the recommendations in its final report would impact women, this article provides an introduction to the differences between men’s and women’s experiences of the tax system. These include the relationship of the tax system with the transfer system, and the gendered difference in treatment for non-compliance in each system.

This article examines the recommendations in the TWG’s final report and explains how gender was reflected. It also critically examines the background paper, ‘Taxation and Gender’, that was provided to the TWG. The paper offered just one substantive point for discussion: ‘Does the Group agree with the Secretariat’s overall judgement that childcare costs should not be deductible?’ The limitations of this focus are discussed. This article suggests that the restricted view of gender and tax in the background paper reflects a broader lack of understanding of gender issues across the New Zealand public sector. It reflects on how this situation came about and considers how it might change.

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