Labour slams ‘big tax breaks’ for tech giants as Government ditches digital levy

With nearly half a billion dollars in potential revenue scrapped by the Government, questions mount over who will benefit from the tax policy shift. Photo / 123rf

By Russell Palmer of RNZ

• Labour claims the Government’s decision to scrap the digital services tax benefits tech giants like Facebook and Google.
• The tax would have imposed a 3% levy on digital services, potentially raising $479 million over four years.
• Revenue Minister Simon Watts said the focus is now on a global solution through the OECD’s efforts.

Labour says the Government’s decision to dump earlier work on a digital services tax is a tax break for tech giants like Facebook and Google.

The Government has confirmed it is removing the bill from its legislative agenda. It would have imposed a 3% tax on digital services for New Zealand users starting in January this year.

Opposition leader Chris Hipkins told reporters at Parliament scrapping it would not have been a priority in a Labour Budget and nor would the savings from pay equity claims.

“We already know where some of that money’s going – it’s going to tax cuts for landlords, tax breaks for tobacco companies; just today we found out hundreds of millions of dollars are going to tax breaks for multinational tech firms like Google and Facebook.”

Labour, using forecasts from the Half-Year Economic and Fiscal Update in December, calculated the tax would have brought in about $479 million over the next four years – starting from January 2026 – and $146m a year after that.

“Frankly, paying Kiwi women properly would be my priority,” Hipkins said. “I think this Government should stand up for New Zealand. I don’t think giving big tax breaks to Google and Facebook is how we should be trying to ingratiate ourselves with Donald Trump’s administration.”

Revenue Minister Simon Watts, announcing the move in a statement on Tuesday, said the previous Labour Government had introduced the bill in 2023 because of a perceived lack of progress from other countries in developing a similar measure – but the situation had since changed.

“A global solution has always been our preferred option, and we have been encouraged by the recent commitment of countries to the OECD work in this area,” he said.

“New Zealand has long supported, and benefited from, collective action and the global rules-based system. By focusing on a global solution, it will enable an agreed, consistent outcome across participating countries.”

Watts said a multilateral process would be a more enduring model.

“Our assessment is, is there a better process to deal with the underlying challenge out there, and on that basis we’ve made a decision to take away the DST Bill that was put on the order paper.”

He said Inland Revenue remained focused on compliance and integrity, including for offshore customers.

Hipkins, however, said he had seen “no evidence whatsoever that there’s going to be an international solution to that”.

“Frankly, it’s not right that Google, Facebook and other big tech companies aren’t paying their fair share of tax while other New Zealanders are being asked to pay more, and low-paid Kiwi women are basically being told that they’re not going to be paid fairly.”

– RNZ