OECD digital tax project torpedoed? Where to for New Zealand?

As reported by the NY Times US has suspended talks with OECD to find a consensus reform for the international taxation of the digitised economy via a letter by US Treasury Secretary Steven Mnuchin to European leaders.

Our last report highlighted that the US was not comfortable with OECD’s proposed Pillar 1 reform and was investigating whether digital services taxes (DST) imposed by a number of countries discriminated against the large US digital businesses (Google, Apple, Facebook, Amazon etc). Ambassador Lighthizer (US Trade Representative) testified that the OECD’s proposal was out “to screw America” and changes to the international tax model should apply to all businesses, not just digital. The US had already determined that trade sanctions may be imposed on France when it turns on its DST.

France, UK, Spain and Italy have jointly fired back a letter to the US Secretary. As reported by Financial Times the Europeans call the US letter as a “provocation” and UK, France and EU have said they still intend to pursue unilateral measures to raise more tax from global digitised companies.

As a trade war looms between US and Europe, where to for New Zealand? New Zealand backed the OECD to develop a consensus solution. To impose our own DST could well see trade sanctions imposed from US, which we can least afford at present. Then again, as we reported Google has unilaterally increased its share of corporate tax in New Zealand.