New Zealand Indirect Taxes in 2022 and Future Global Trends (Part 2) – Bloomberg Tax

By Eugen Trombitas
In a two-part article, Eugen Trombitas of PwC reviews the significant indirect tax developments in New Zealand during 2022, and takes a look at future global indirect tax policy trends.
The main indirect tax developments over the past year in New Zealand were recapped in Part 1 of this article. Part 2 of this article covers topical global indirect tax issues and future trends for 2023.
Many countries have now implemented a version of the value-added tax/goods and services tax electronically supplied services rules and low-value imported goods rules. According to the Organization for Economic Cooperation and Development in the recent report “Consumption Tax Trends 2022”:
“All OECD countries with a VAT have implemented, or committed to, the OECD standards for the collection of VAT on online sales of services and digital products from non-resident e-commerce vendors. Many OECD countries have further expanded these e-commerce VAT regimes, in particular to include online sales of small parcels imported from abroad by foreign e-commerce marketplaces and other digital vendors.”
The next wave of regulatory change relates to digital platforms operating in the gig or sharing economy. Several countries, for example Canada and India, have decided to place the GST liability on the platform rather than on the underlying seller. Other countries, such as Australia, have decided to require platforms to report information about the underlying sellers, i.e., not to impose full liability on the platforms. It is too early to tell whether a full liability model will achieve the most desired outcome, and there have been some teething issues in countries like India in relation to matching income compared to the tax paid, as well as the treatment of delivery charges in relation to food delivery.
Significantly, the European Commission announced on Dec. 8 that EU member states should explore a full liability model for platforms in relation to short-term accommodation and passenger transportation.
One of the most significant global indirect tax developments in 2022 concerns the application of the various indirect tax rules to NFTs. In simple terms, an NFT is a unique digital asset and its ownership can be both demonstrated and verified via distributed ledger technology, DLT. The owner of an NFT owns the “token,” which is a digital entry on the DLT.
NFTs can have multiple characteristics and take various digital forms, and can be traded on platforms, online auction houses, or acquired directly from artists and creators. There are various related services performed by parties involved in the process adding to the rich dimensions in this area.
NFTs have presented complex regulatory issues globally. The position with respect to tax is still emerging, and in many countries the core issue is whether NFTs are covered by the definition of “cryptoasset” or not (assuming such a definition exists). The key issue from a VAT/GST perspective is the “what”—what is being supplied when an NFT is created or sold? Many countries are exploring the domestic VAT treatment of NFTs. In relation to cross-border supplies, the emerging position is that the various electronically supplied services (or remote services) rules are likely to apply to NFTs. The VAT issues associated with NFTs have been covered in PwC’s 2022 Global Crypto Tax Report 2022.
As national economies and supply chains look to bounce back in 2023, it is widely expected that technology and digital innovation will play a vital role. At a high level, more expansion is expected globally in relation to VAT/GST rules concerning digital imports (both goods and services), and significant change is expected in relation to the platform and gig economies. In addition, more countries will consider making changes to their VAT rules in relation to cryptocurrencies and fintech. E-invoicing and real time reporting are expected to become a permanent part of the indirect tax landscape.
On Dec. 8, the European Commission proposed a series of significant measures to modernize and make the EU’s VAT system work better for businesses, as well as make it more resilient to fraud by embracing and promoting digitalization. The VAT in the Digital Age proposals are set against the backdrop of 30-year VAT rules and the digital reality that has resulted in two main challenges: sub-optimal VAT collection and control; and excessive burdens and compliance costs.
Under ViDA, key actions will help member states collect up to an estimated 18 billion euros ($19 billion) more in VAT revenues annually, while helping businesses to grow through:
Another global trend is that tax authorities will be sharing more information and require more information from payment processors and platforms. In 2023, the impact of DAC7 will be significant on platform businesses and their processes—this development will set the foundations for future tax reporting trends globally, beyond the EU.
In relation to cryptoassets, tax reporting has become a reality for the industry. Major steps to regulate digital assets at a global level include the OECD’s Crypto-Asset Reporting Framework and updates to the Common Reporting Standard, along with DAC8 in the EU and tax reporting rules in the US.
These mushrooming obligations will require careful planning as well as a tech-enabled and innovative approach to systems and data management.
In conclusion, embracing the debate on tax policy issues and being ready for the future tax changes will become part of the norm. The author’s expectation is that governments across the globe will keep focusing on indirect taxes as a key priority.
This article does not necessarily reflect the opinion of Bloomberg Industry Group, Inc., the publisher of Bloomberg Law and Bloomberg Tax, or its owners.
Eugen Trombitas is PwC’s global digital indirect taxes leader.
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