NZ Looks to Start Taxing Offshore Gaming Companies

At NZCasinoClub.com, we have previously talked about new tax rates affecting the Australian sports betting scene, but now it’s New Zealand's turn to set about making tax reforms.

As New Zealand braces itself for the upcoming general elections this October, proposals surrounding tax reforms, particularly on offshore gaming companies, are becoming major talking points amongst the political factions.

The National Party is poised to introduce groundbreaking tax reforms targeting gaming operators and foreign-owned real estate if they secure majority control, pitting their visions sharply against those of the incumbent Labour Party.

What are the Proposed Tax Reforms?

The National Party's tax reforms come amidst allegations against the Labour Party of economic mismanagement leading to rampant inflation, significant interest rate hikes, and a contracting economy.

To counter these economic pressures, the party proposes extensive tax changes. Christopher Luxon, the leader of the National Party, believes these reforms could be a panacea for the country's ailing economy, generating more than NZ$1.2 billion in additional revenue.

Targeting Offshore Gaming Companies

The National Party aims to institutionalise a tax on offshore gaming companies, thus closing existing iGaming loopholes. The current legal framework does not outlaw the use of offshore gaming sites by New Zealanders. However, these sites operate in an unregulated manner, contributing no tax revenue to the national coffers. The party estimates that implementing such a tax could generate approximately NZ$179 million annually.

However, there is a disagreement about the estimated revenue from the proposed tax, with Labour Party's Kieran McAnulty suggesting that the National Party has grossly miscalculated the potential revenue from the regulated iGaming market, placing the actual figure at approximately half the amount stated.

Regulations and Compliance

To operationalise this tax, offshore online casino operators would be required to register and report their earnings. Non-compliance would result in repercussions like IP geoblocking. The proposed framework doesn't only include Goods and Services Tax but extends to corporate taxes and casino fees as well.

Nicola Willis of the National Party clarified that a significant portion of the tax revenue would originate from corporate taxes, contributing more than the GST component.

Challenges and Disputes

Labour representatives, Barbara Edmonds and Kieran McAnulty, argue that the projections by the National Party are overly optimistic and would necessitate a quadrupling of online gambling. They contend that the assumption that all tax generated would come via GST is flawed, as the current market they are collecting GST from does not accurately represent the full market. Willis countered by citing the presence of a significant black market in offshore online gambling operations that isn't currently paying GST, corporate tax, or casino levies.

What Does this Mean for Households

The proposed tax reforms are said to shift focus back to the working class, allowing many to work fewer jobs to counter the effects of rising inflation and high taxes. The National Party believes changes in tax laws would enhance the disposable income of average households, providing up to NZ$500 more per month for some households.

Foreign Buyer Tax

In addition to the offshore gaming tax, the party has proposed a 15% “foreign buyer tax” on foreigners buying homes valued at NZ$2 million or more, expecting to generate an additional NZ$740 million in tax revenue annually. Furthermore, the abolition of the government’s tax break on commercial real estate depreciation could bring another NZ$525 million to the government.

What Could Happen Next

With the National Party currently leading in the political polls over the Labour Party, the possibility of these tax reforms seeing the light of day is ever-increasing. The proposed changes have sparked intense debates, with disputes over the potential revenues and the scale of online gambling in the country.

If the National Party manages to sway the electorate and achieve its goal, New Zealand could witness these extensive tax reforms coming into effect as early as July 1 next year, reshaping the economic landscape of the country and bringing unregulated offshore gaming companies under stringent regulatory oversight.