Businesses such as Google should pay a digital services tax in the interim while international tax rules catch up. (Photo: Getty).

The Bulletin: Digital services tax takes shape

Good morning, and welcome to The Bulletin. Eid Mubarak to all. In today’s edition: Digital services tax takes shape, Corrections makes unexpected money out of prison canteens, and infant formula industry takes hit on China moves. 

We’re getting a much better idea of what the digital services tax is going to look like, after the release of discussion document of the options. There’s two that could be used, which are either changing international tax rules, or applying a new, seperate tax on highly digitised multinationals, reports Newshub. Tax expert John Shewan told them the details of how that gets worked out will be important, but in general terms the taxation system hadn’t kept up with changes in the modern economy.

PM Ardern says it’s not realistic to expect either people or governments to stop using services from the likes of Google, Facebook and Uber, so instead they should be taxed, reports Radio NZ. Her government’s preference is to have the OECD pick up the slack, and that will be part of the government’s consultation plan as well. That will rely on progress being made on an international solution this year though, and if it doesn’t happen then the government will put in an interim step.

As Stuff’s Tom Pullar-Strecker reports, the issue is once again being cast as one of fairness. Digital giants make significant revenues out of New Zealand companies, but because their operations are based in low-tax jurisdictions, they get away with minimal contributions to this country’s coffers. But without overseas buy-in as well in the form of an OECD agreement, there could be very limited room to move due to existing trade agreements. There are also fears that New Zealand moves to increase tax could correspondingly result in further taxes on New Zealand exports.

Grant Thornton tax expert Oksana Siminoff wrote about these aspects on The Spinoff last week, and took a very different line. She argued that the concept of fairness was a strange one to apply to tax, and it could lead to outcomes that are basically political rather than economic. Given that the revenues from a digital services tax have been estimated in the realm of $30-80 million a year (not a lot of money) it’s not a bad point – and as well as these arguments there’s also the possibility the digital giants will simply be ever-more greedy, and shift costs back to consumers. But in the wake of the capital gains tax being killed off, the government has made it clear they’ll be looking at other changes aimed at making those not currently paying tax to pay more of it.


Corrections are making millions of dollars a year from prison canteens, but insist they’re not turning a profit, reports the NZ Herald (paywalled.) A high prison population has resulted in $4.4 million more than expected coming in. In the past prisoners have complained about being ripped off by the canteen system. Corrections also made $20 million from prisoner work schemes, and I’d love to see more detail into how much of that the prisoners doing the work actually get.


New Zealand’s infant formula industry is likely to be hit hard by moves in China to boost domestic production. Bloomberg reports shares in A2 Milk were hammered yesterday on the NZX after the news came out, though it’s not like they’re going to get shut out of the market or anything. But it is expected that their potential market will shrink as a result, and they may have to look to other countries to compensate. Radio NZ reports A2 Milk was the largest decline in what was otherwise a horrible day for the sharemarket – the worst the NZX has had since October last year.


A State Service inquiry is going to be held into whatever the hell it was happened with Treasury last week. NZ Herald political editor Audrey Young (paywalled) has put together a very useful timeline of events, with the particular points that will be honed in on. The key line is this: “There is no doubt that the public and probably Robertson and Ardern were misled by Makhlouf.” In any case, it may not matter if he’s pushed or jumps early as a result – Mr Makhlouf is due to leave the Treasury Secretary job on June 27.


Farm prices have lifted dramatically amid a rush of sales to forestry investors, reports Farmers Weekly. They are likely to plant heavily, on the assumption that carbon credit prices will soon rise enough to make it profitable. That’s got plenty of rural mayors concerned that rural economies will suffer as well, with fewer jobs created for the equivalent land area having a flow-on effect for services.


The number of flu deaths in New Zealand this season have risen to three, with the average season killing hundreds, reports Newsroom. The number of cases is slightly higher than average, and it is one of the deadliest infectious diseases in the country. While an annual flu shot isn’t a guarantee against contracting the disease, it does go a long way towards prevention. The word annual is pretty important there too – the virus mutates – so even if you got one last year, if you haven’t got around to it in 2019, it might be a good idea to get on with it.


A New Plymouth family have turned their quarter acre section backyard into an urban farm which provides both abundant food and a small income, reports the Taranaki Daily News. They put in $1,000 in upfront capital, and it requires 3-4 days of work a week to cultivate. But the results are immense – enough food gets grown to feed 50 people a week, and some of it can also be sold at organic markets. They’ve just been awarded a grant to teach other people how to do it too.


To me, this story seems like a frightening indictment of a lack of support for those up against it. A Mosgiel man has gone on a low-level crime spree in order to get locked up again, reports the ODT. Police say he had nowhere else to go – here’s a quote from a Senior Sergeant in court: “When he was arrested he admitted the [offending], stating that he wanted to get arrested to get off the streets as he’s homeless and just released from prison.”


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The great inflatables: Donald Trump and Sadiq Khan, feat The Queen

Right now on The Spinoff: Amanda Chapman writes about how screaming drivers are the reason it can be so horrible to cycle around Auckland. Toby Manhire explains the ongoing battle between US President Donald Trump and London mayor Sadiq Khan. Dr Geoff Willmott writes about the research and technology that will be required to combat climate change. Catherine Robertson reviews the brand new Greg McGee book, which is still examining the same question – whaddarya?

Finally, hands up if you need this article, or know someone who does: Heather Cleland Woods and Holly Scott write about the use of screens before bed, and how you can mitigate it and still get a decent night’s sleep.


I was going to do a big round of feedback on Auckland Transport’s spend of $12,000 on social media influencers. But unfortunately, pretty much everyone agrees with me that it’s a silly thing to get up in arms about, so I won’t bother repeating the same thing over and over again. However, there were a few points made that went a bit deeper into it.

Communications expert Dr Jess Berentson-Shaw had an interesting way of looking at using influencers. “Messengers matter in effective storytelling. People trust and listen to people they see their values reflected in.” Jeanette disagreed that social influencers were necessarily the best way to do that, saying “any results attributed are unquantifiable and undemocratic, yet still are used as though they are some kind of ‘public consensus’.” But Rosie – who works in the ad world – countered that by arguing “in advertising, the aim has always been (and will always be) to have your message be where the most eyeballs are. In the past, that has often meant TV and print ads. But that has changed.”


Japan is often thought of as a destination for NZ rugby players to get a last massive paycheque, but the relationship is way more complex. That’s a conclusion drawn by Radio NZ’s Joe Porter in this really interesting feature on the two-way transmission of players, coaches and rugby culture generally between the two countries. The really fascinating thing is that some Japanese players are using NZ club rugby as something of a finishing school, and in the process boost declining player stocks. A Brave Blossoms win over the All Blacks might still be a long way away, but their national team is getting better every year.

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Meanwhile in the cricket, Afghanistan have put in a performance both dreadful and brilliant to lose to Sri Lanka. They bowled and fielded absolutely terribly in the first innings, until flicking a switch (right after I went to sleep) and tearing the Sri Lankans to pieces – they went from 2-144 in the 22nd over, before being all out for 201. Then Afghanistan batted, losing a clump of early wickets, recovering slightly, before collapsing again when the chase looked in reach, to eventually lose by 34 runs. It’s a huge blow to Afghanistan’s chances of being the surprise package of the tournament, and the way both teams played it wouldn’t be a huge surprise to see them finish 9th and 10th.


From our partners: A two-tier system of energy use is developing, with those on high incomes much more able to reduce their bills than households on lower incomes. Vector’s Chief Risk and Sustainability Officer Kate Beddoe outlines what the company plans to do about that.


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