Small countries like New Zealand are being hit by a move to put global cooperation on tax rules on the back burner. Photo: RNZ
The United States-led tariff war has pushed global cooperation on international tax rules to the back burner, leaving small countries like New Zealand the poorer for it.
University of Auckland legal scholar Craig Elliffe's paper* on the "quiet evolution" reshaping international tax law was which was likely to adversely affect New Zealand as a small open economy that relies on global trade.
"I think bottom line for all of this is that we have benefited from the major developments over the last 100 years of international tax," he said.
"And so it's really quite sad ... like a whole lot of sand in the gearbox for international tax, which is a real shame."
As a result, Professor Elliffe said New Zealand would need to pay closer attention to its own domestic tax policies, as it would become much less likely to benefit from international tax treaties, such as the digital services tax, which had been in the works for many years.
"It seems now very likely that the type of international agreement, just in the short term, anyway, that everyone has been working towards for the last decade, is really unlikely to manifest itself."
Elliffe said the international consensus was that global multinationals who carry on highly digitalised businesses should pay a minimum 15 percent tax.
"So we're talking about the Googles and Facebooks ... they don't pay anywhere near the same quantum of tax as a physical business that was operating."
He said the global trade war was also causing large economies to become more inwardly focused.
"There's been a clear trend towards preserving and increasing the authority of certain domestic tax laws," Elliffe said.
"Such domestic laws, however, can conflict with the reduction or elimination of double taxation and undermine the rationale for tax treaties."
Tax treaties had been the backbone of cross-border taxation, designed primarily to prevent double taxation - where the same income was taxed in two different countries, as well as used to prevent tax avoidance and evasion, especially by multinational companies and wealthy individuals, he said.
He said there had been an increasing shift to preserving the authority of certain domestic tax laws.
"It means countries can't rely on the treaties to the same extent they previously had," he said.
If countries continued to prioritise domestic tax sovereignty over treaty commitments, he said the result may be a more fragmented and unpredictable tax landscape.
He said New Zealand's good and services tax, could also become a focus for the United States as it looked to apply reciprocal tariffs, even though GST was a consumer tax and not a border tax.
*Professor Elliffe's paper on the quiet revolution was among six shortlisted for the 2025 Frans Vanistendael Award for International Tax Law -- one of the field's most prestigious honours.
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