In the News
Digital services tax on multinationals from 2025
New Zealand is taking proactive measures to introduce a Digital Services Tax (DST) targeting major multinational corporations operating in the digital sphere. This move aligns with global efforts to reform taxation in the digital economy, addressing the tax challenges posed by the rapidly evolving digital business landscape. These challenges have outpaced the capabilities of the existing international tax framework, making it difficult to effectively tax overseas digital enterprises.
Countries worldwide are contending with the intricate task of establishing equitable taxation in response to the increasing digitisation of commerce. This shared concern underscores the need for a coordinated approach to taxation in the digital age.
While New Zealand has been actively engaged in OECD negotiations aimed at creating a multilateral tax agreement, progress has been slow. In alignment with these negotiations, New Zealand has committed to refraining from independently implementing a DST until 1 January 2025. However, the Government has proactively prepared the Digital Services Tax Bill, which would allow for the introduction of the DST at an earlier date should the OECD negotiations fail to yield a satisfactory outcome. The Government consulted on the content of such legislation in 2019.
This proposal builds upon a commitment outlined in the Labour Party's manifesto. Specifically, it targets multinational businesses generating over €750 million in global digital services revenue, and more than NZD$3.5 million locally from services provided to New Zealand users. It encompasses social media platforms, internet search engines, and online marketplaces. The tax rate would be set at a rate of 3% on digital services revenues, which mirrors those adopted by other nations, including France and the United Kingdom. Over a four-year period, the DST is projected to generate approximately $222 million in revenue. In the UK, the similar tax surpassed revenue projections, albeit amid heightened demand for digital services during the pandemic.
Water Services Reform Programme
Over the last month, the Government has finalised the comprehensive legislative package underpinning the Water Services Reform Programme, also known as Affordable Water Reform (Reform), which involves the establishment of ten publicly owned water services entities (WSEs). These entities will take over the management of the majority of New Zealand's drinking water, wastewater and urban stormwater assets from 67 territorial authorities.
The key pieces of legislation that have been progressed are as follows:
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Water Services Entities Amendment Act 2023: This Act was passed on 15 August 2023 and amends the Water Services Entities Act 2022. It gives effect to the Government's refocused Reform announced in April 2023, by establishing ten WSEs based on existing regional council boundaries (instead of the original proposal of four WSEs). In particular, this Act provides that the Northland and Auckland WSE (known as Wai Tāmaki ki te Hiku) will start operation on 1 July 2024, while the other nine WSEs will start delivery of water services on a date between 1 July 2024 and 1 July 2026.
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Water Services Legislation Act 2023: This Act was passed on 22 August 2023 and primarily amends the Water Services Entities Act 2022 to introduce provisions regarding the WSEs functions, powers and duties, and provide for transitional arrangements.
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Water Services Economic Efficiency and Consumer Protection Act 2023: This Act was passed on 22 August 2023 and was the final piece of the Reform legislation. This Act introduces an economic regulation and consumer protection regime for the reformed water services sector, with the Commerce Commission as the economic regulator. A Water Services Commissioner is expected to be appointed, who will be the principal spokesperson for the Commerce Commission's functions in relation to this Act.
Wai Tāmaki ki te Hiku has commenced preparations to transition to the new system of water services delivery in the Northland and Auckland Regions, and the membership of the establishment board of this entity has been approved by Cabinet.
Given the looming election and the contentious nature of the Reform, the future of water services delivery in New Zealand is uncertain, with its full effect possibly determined by the election outcome.
Increased safety standards for adventure activity sector
Following the Whakaari White Island tragedy, the Government has been assessing ways to improve safety standards for adventure activities. The Minister for Workplace Relations, Hon Carmel Sepuloni, acknowledged that adventure activities are a major draw card for international tourists and result in significant economic opportunities in New Zealand's regions. Strengthened safety regulations aim to ensure New Zealanders and tourists are kept safe when engaging in these activities, and to maintain the high reputation of New Zealand's adventure tourism globally.
In August 2023, the Ministry for Workplace Relations announced the publication of an updated Safety Audit Standard, which will come into effect from 1 April 2024. Operators of adventure activities (as defined under the Regulations) will be legally required to take all reasonable steps to ensure participants are informed of the risks they may be exposed to in participating in an adventure activity. This includes communicating these risks before the customer purchases a ticket, before the activity begins and throughout the activity, including if the risks change.
Operators will also be required to monitor risks arising from natural hazards where an activity is taking place, and have clear criteria for postponing, cancelling or moving activities should the risks change. These changes will be supplemented by detailed guidance on managing natural hazard risks, as well as activity-specific safety guidance, the development of which is currently underway.
Under the strengthened standards, WorkSafe will also receive more expansive powers in relation to adventure activities. This will allow it to:
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suspend operations immediately if there is an imminent serious risk, and
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suspend, cancel or refuse registration applications of operators who cannot provide activities safely.
Agricultural emissions reduction plan
The Government has announced its final plan to reduce agricultural emissions (Plan), after a five-year process that involved working with farming leaders. Under the Plan:
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Sequestration on-farm will be rewarded through scientifically validated forms in the New Zealand Emissions Trading Scheme (ETS), rather than the establishment of a parallel system. The agricultural pricing system is anticipated to commence in late 2025.
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The Government is proposing to defer the date animals-farmers become liable for their emissions under the ETS by two years. Under the Climate Change Response Act, farm-level reporting requirements would commence on 1 January 2024. Consultation on the proposed deferral closed on 6 September 2023. If the Government decides to proceed with the deferral, it will issue an Order in Council prior to 1 January 2024.
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The Government plans to invest in new tools and technology aimed at reducing on-farm emissions.
Immigration update
The Government has pushed ahead with a range of changes in the immigration space over recent months and more may be on the horizon.
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On 21 June 2023, the Government announced changes to the Skilled Migrant Category to:
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remove the cap on highly skilled workers;
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introduce a six point eligibility system;
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update the criteria / pathway to residency; and
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extend the Accredited Employer Work Visa (AEWV) to five years and introduce a five-year maximum continuous stay for those visa holders.
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On 6 July 2023, the Worker Protection (Migrant and Other Employees) Act received Royal Assent. In an effort to reduce migrant exploitation, the Act brings in new infringement offences to target breaches at a lower-level and also disqualifies individuals convicted of migrant exploitation from managing and directing companies in New Zealand. The Act introduces the final changes recommended by the 2020 Temporary Migrant Worker Exploitation Review. See more on this Act below.
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On 1 July 2023, the Government announced reciprocal changes to the Working Holiday Visa with the United Kingdom. The eligible age for a visa holder will be extended to 35-year-olds, and both the length of stay and work period will be extended to three years.
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On 26 August 2023, the Government announced a new residence pathway for Special Ukraine Visa holders. As at 20 August 2023, 1,510 Special Ukraine Visas had been granted. The pathway will be open to Special Ukraine Visa holders where the principal applicant was granted the visa and travelled to New Zealand before 15 March 2024.
Since 2022, 6,300 overseas health workers have joined the New Zealand work force through the AEWV scheme and the Green List Straight to Residence pathway. A further 800 offshore visa holders have been approved and are yet to travel to New Zealand.
However, more changes to the AEWV scheme may follow with the launch of a new review by the Public Service Commission into AEWV, following the discovery of dozens of migrant workers stranded without employment in Auckland.
Recent Resource Management updates
On 23 August 2023, the Natural and Built Environment Act 2023 (NBEA) and the Spatial Planning Act 2023 (SPA) received Royal Assent. These two Acts will replace the Resource Management Act 1991 (RMA).
Most changes will be phased in over time and will 'go live' on a region-by-region basis once the region's first NBEA plan becomes operative. Consequently, most existing RMA instruments remain valid until that time. However, a number of changes are in force as at 24 August 2023, including:
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Fast-track consenting for certain housing and infrastructure developments (based on the process developed during COVID-19).
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Changes to council enforcement powers and penalties (including increasing monetary penalties for non-compliance, and councils being able to consider compliance history when considering resource consents).
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Changes to who can apply to be a requiring authority.
More broadly, core elements of the NBEA (which the SPA sits alongside to create a single integrated system) include:
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a new purpose to uphold te Oranga o te Taiao, which is considered an intergenerational ethic that connects the health and wellbeing of the natural environment with all New Zealanders;
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the introduction of outcomes;
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implementation of a new national planning framework;
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a new fast-track consenting process;
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a framework for natural and built environments plans; and
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improved recognition of Te Tiriti o Waitangi.
See our RMA series here for further analysis: