Will the new government gamble on online casino gambling tax?

30 November 2023

The outcome of the recent general election and the formation of the new Government has placed renewed focus on the Government’s tax policy and how these changes could be implemented. From a tax perspective, much of the focus in the run-up to the general election had been on National’s proposal for a foreign buyer tax (which has now been ruled out in the National – New Zealand First Coalition Agreement), one change noted in our earlier article which has not received as much focus is the proposal to introduce an online casino gambling tax. 

This article summarises the proposed online casino gambling tax and outlines the potential issues that the new Government may need to consider when implementing the proposal. 

The proposal

National’s ‘Back Pocket Boost’ tax policy document states that:

Offshore online casino gambling services currently benefit from a loophole where they are not required to register their earnings in New Zealand for tax purposes. Where domestic casino operators are required to pay GST, company tax and other levies, offshore operators serving New Zealand customers are able to dodge these obligations.

The solution that National proposes is to:

    • establish a regulatory regime for online casino gambling to ensure offshore operators pay their fair share; and
    • to require online casino gambling operators to register and report their earnings for tax purposes, with IP 'geo-blocking’ of services that do not comply with the New Zealand licensing regime.

National’s tax policy document forecasts that the online casino gambling tax will raise NZ$179 million on average per year. 

There is little international precedent for National’s proposed tax. The only other example of a targeted gambling tax that the authors identified is the controversial 28% tax on online gaming introduced in India. 


While National’s tax policy document states that offshore operators are able to “dodge” their GST obligations, offshore operators are already technically subject to GST under the remote services rules, which were enacted in 2016. 

Gambling services were expressly recognised at the time of enactment as being an example of services which would be within scope of the remote services GST rules.  There are special rules for non-resident gambling suppliers who need to return GST on amounts received from New Zealand residents less amounts paid out to New Zealand residents.  Losses derived from one taxable period may offset positive amounts in subsequent taxable periods. 

Where there are issues regarding a lack of compliance with the remote services rules, the proposal to introduce a regulatory regime for online casino gambling may bring offshore operators to the attention of the Commissioner of Inland Revenue. This may help support enforcement efforts for the existing remote services GST rules.

It is unclear how the proposal would deal with New Zealand customers using virtual private networks (VPN’s) to circumvent IP ‘geo-blocking’ in the event that offshore operators did not comply with the new rules. We note that when the remote services rules were introduced, the IRD’s special report noted that:

If a customer has provided incorrect or false information to access content that is geographically restricted, and this consequentially results in GST not being charged, the reverse charge rule in section 5(27) and the existing knowledge offences would not be expected to apply. However, there may be other consequences unrelated to New Zealand’s tax obligations.

Income tax

National’s tax policy document also states that offshore operators are able to dodge their obligations to pay company tax (income tax imposed on companies at 28%). New Zealand income tax is imposed on the worldwide income of residents and on New Zealand sourced income for non-residents. 

New Zealand’s network of double tax agreements (DTA’s) provides that non-residents may only be subject to New Zealand income tax on business profits sourced in New Zealand to the extent that those profits are attributable to a permanent establishment that the non-resident has in New Zealand. 

An attempt to impose New Zealand income tax on offshore operators who are non-residents for New Zealand income tax purposes and who do not have a permanent establishment in New Zealand would, where applicable, potentially constitute a breach of an applicable DTA.

While there is no current Bill seeking to introduce an online casino gambling tax, careful consideration of the drafting would be needed in order to minimise the likelihood of challenge on the basis that such a tax constituted a breach of an applicable DTA.  Some of these potential considerations outlined below have been considered in introducing the Digital Services Tax Bill on 31 August 2023. 

The potential considerations include that an online casino gambling tax:

    • may need to be introduced in a separate piece of legislation rather than as being an amendment to the Income Tax Act 2007 (the Act). This is because the Act contains a section which provides that DTA’s have overriding effect over tax imposed in the Act. An online casino gambling tax seeking to impose tax on the income of non-residents who do not have a permanent establishment in New Zealand would be overridden by an applicable DTA which provides that non-residents may only be subject to income tax in New Zealand on income attributable to a permanent establishment in New Zealand. A separate piece of legislation would minimise the risk that the online casino gambling tax could breach an applicable DTA;
    • may need to be imposed on the gross revenues from casino gambling services provided to customers in New Zealand rather than on the net income of the offshore operators. This could minimise the risk that the online casino gambling tax could be viewed as a de facto income tax which should instead be subject to the Act and the overriding position of an applicable DTA; and
    • would need to consider the non-discrimination clauses in New Zealand’s network of DTA’s as any online casino gambling tax would appear to solely target offshore operators. Non-discrimination clauses in DTA’s are intended to prevent one party from imposing greater tax liabilities on nationals of the DTA counterparty relative to its own nationals. While conceivably the online casino gambling tax could be designed not to be an income tax or ancillary to income tax, the non-discrimination clauses in some of New Zealand’s DTA (for example, with Australia) apply to all taxes.

It is unclear to what extent offshore operators are located in jurisdictions with which New Zealand does not have a DTA. Where an offshore operator is located in such a jurisdiction, concerns about the imposition of income tax constituting a breach of a DTA would not be applicable. In those cases, New Zealand would have a right to tax the business profits of offshore operators sourced in New Zealand.


Significant work will need to be undertaken by the new Government to develop a workable regime that achieves the purpose of the policy while navigating New Zealand’s network of DTA’s. 

If you have any questions about the matters raised in this article, please get in touch with the contacts listed or your usual Bell Gully adviser.

Disclaimer: This publication is necessarily brief and general in nature. You should seek professional advice before taking any action in relation to the matters dealt with in this publication.