Facebook New Zealand's trifling tax take

Facebook boss Mark Zuckerberg: The social network has 2.5 million New Zealand users, but claimed both a loss and a ...

Facebook boss Mark Zuckerberg: The social network has 2.5 million New Zealand users, but claimed both a loss and a modest tax bill.

Facebook paid just $43,000 of tax in New Zealand last year, according to financial statements filed with the Companies Office.

The social media behemoth reported its New Zealand income rose 41 per cent to $1.2 million for the 2014 calendar year.

However, substantial expenses meant the company was able to claim a loss.

It paid $43,261 of tax, or about the same amount as a mid-range doctor or lawyer would.

Last year the Labour party infamously threatened to shut Facebook down, before softening its stance.

Finance spokesman Grant Robertson said Labour was not interested in stopping companies from operating in New Zealand.

"We want them here, but we want them paying their share as well," he said. "It's not just Facebook, and I think it's important no single company gets pulled out here."

Robertson said New Zealand needed to push hard in support of international initiatives, as well as investigate tax policies at home. 

"We believe there's more that can be done at a domestic level to ensure we understand how these companies are paying what appears to be a ludicrously low level of tax."

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One example that could use some deep digging was related-party lending within companies, he said.

Facebook has revenues of US$12 billion (NZ$17.8b) and a market capitalisation of US$240b, with about 2.5 million users in New Zealand.

The local figures appear to suggest each Kiwi only generates about 50 cents of revenue a year, far below the global average of US$7.24 per user.

However, the $1.2m sum is not necessarily a reflection of sales in New Zealand.

Instead, the company earned the income in return for unspecified services provided to another subsidiary, Facebook Ireland.

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Ireland has a 12.5 per cent corporate tax rate, less than half New Zealand's 28 per cent.

Irish law also allows a structure known as "the double Irish", in which two subsidiaries are registered, with one routing its revenue through a tax haven.

That loophole will close in the next few years as part of international efforts to crack down on sweetheart tax deals for multinationals.

Leading the charge is the OECD, which is launching a 15-step base erosion and profit shifting (BEPS) plan aimed at reforming the system.

At present, income tax is paid in the country where the capital or labour producing profit is situated, rather than where customers or sales are based.

The BEPS action plan aims to close loopholes and realign tax structures with economic activity such as employment, assets and sales.

 - Stuff


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