Download This PaperData First – Tax Next: How Fiji’s Technology Can Improve New Zealand’s 'Netflix Tax' (Part 2)
94 Tax Notes International 319, 2019
21 Pages Posted: 16 May 2020
Date Written: 2019
Abstract
This is the second in a four-part series addressing VAT/GST avoidance schemes involving remote sales of services. These schemes have been growing in importance. The IMF reports that the services component of cross-border trade has been on the rise for fifty-years or more, making the Internet a serious threat to revenue. Technology has accelerated tax avoidance.
Statutory draftsmen in New Zealand have looked at this problem directly with what has been called the Netflix Tax. Technologist in Fiji have been struggling with similar problems and have developed technology-based security systems that would seem to address remote sales of services more effectively than traditional approaches. Fighting technology with technology has some distinct advantages over a traditional statute and regulation approach. In a very real sense, computer code can be law, and can function as a tax regulation.
Three additional aspects of the New Zealand Netflix Tax will be considered in this part:
(a) threshold rules;
(b) remote enforcement; and
(c) double taxation of remote services. In each case the New Zealand rules will be considered, followed by an overlay of Fiji’s technological solution to show how inherent problems with traditional statutory solutions adopted by New Zealand can be mitigated with technology.
The two papers following this part will consider four remaining issues:
(a) placing tax responsibility for reporting and collecting VAT/GST with an electronic marketplace;
(b) how to deal with domestic agents of remote service providers;
(c) how to detect and respond to false information sent to the tax administration; and
(d) how to deal with dual-status taxpayers.
Keywords: Value Added Tax, VAT, Goods and Services Tax, GST, Pacific Island Countries, PICs, B2C Reverse Charge, Proof of Audit, Blockchain Information Exchange, Netflix Tax, Amazon Tax,, Fiji, VAT Monitoring System, VMS, New Zealand, IMF, Digital Invoice
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