New Zealand will introduce legislation this week that enables a digital services tax on large multinational companies, though the levy won’t be imposed until 2025.

The proposed tax would be payable by multinational businesses that make over €750mil (about RM3.7bil) a year from global digital services and over NZ$3.5mil a year from digital services provided to New Zealand users, Finance Minister Grant Robertson said Tuesday in Wellington.

It would be applied at 3% on gross taxable New Zealand digital services revenue, similar to the taxes adopted by other jurisdictions such as France and the UK, and is expected to generate NZ$222mil over four years, he said.

Governments around the world are concerned that the likes of Google and Facebook don’t pay enough tax or don’t pay it in the right places, and that current global tax rules don’t appropriately capture the way these companies make money.

"It’s clear that the international tax framework hasn’t kept pace with changes in modern business practice and with the increasing digitization of commerce,” Robertson said. "This is a problem faced by countries across the world. With more and more overseas businesses embracing digital business models, our ability to tax them is restricted and the burden falls to smaller groups of taxpayers.”

New Zealand’s government has been participating in negotiations at the OECD for a multilateral agreement on how to address these issues, but Robertson said progress has been slow.

"While we will keep working to support a multilateral agreement, we are not prepared to simply wait around until then to find out,” he said. "That is why we have prepared legislation that is ready to go if the OECD process does not succeed.”

 - Bloomberg