Simon Moutter, Spark’s MD, says overseas companies like Netflix are avoiding GST.
He has a point, and it’s not news really. But the debate grows as more New Zealand businesses feel the heat from overseas digital competitors.
I’ve no doubt a solution will be found and I agree with Moutter, it will be a technology solution.
VAT /GST regimes around the world apply the “destination principle” i.e. the tax burden lies where consumption occurs. Unless we abandon that policy building block we must find a way to tax the increasingly valuable services being purchased from offshore.
Some countries are forging ahead without waiting for the OECD to come up with a multilateral solution [South Africa, the EU, the Bahamas]. As Moutter points out, the US has rules in place for sales taxes on inter-state transactions, but of course enforcement isn’t as difficult when the two taxing states are part of the same country.
This is a challenge for technology entrepreneurs as much as tax administrators.