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Spotlight on tech company tax bills

TOM PULLAR-STRECKER
Last updated 13:28 29/11/2012

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Labour is calling on the Government to crack down on tax avoidance by multinational technology companies, saying Facebook's meagre tax bill made "a mockery of Peter Dunne's refusal to consider closing tax loopholes".

"Facebook only paid $14,497 tax in New Zealand last year. The year before it was $5238. For a company that has 2.2 million users in New Zealand and makes billions worldwide, that's barely believable," Labour revenue spokesman David Clark said. 

He said Facebook appeared to be using an accounting technique called the "double Irish" to funnel income to Ireland and take advantage of its low 12.5 per cent corporate tax rate. 

"Revenue Minister Peter Dunne calls that 'legitimate tax avoidance'. I call that a rort," Clark said.

He said the Government should follow Australia and Europe by bringing in laws "to clamp down on this behaviour".

"For Peter Dunne to wash his hands of this issue is simply not good enough. It's not just Facebook that funnels revenue through its low-tax Irish counterpart. Google New Zealand does it too," he said.

Revenue Minister Peter Dunne last week refused to say whether the Government would follow Australia and European governments in cracking down on tax avoidance schemes used by multinationals but said the Government was "concerned" and continually sought to improve tax laws. 

"This issue with multinationals is very much an international problem, with a number of tax jurisdictions having real concerns about the amount of tax not being paid by some of these huge companies. 

"New Zealanders generally believe our tax system is fair and that is hard-won credibility, so I see this issue as one that we need to keep working on resolving," he said last week. 

Clark dismissed that as "waffle".

"Being concerned about something won't fix it. Committing his department's resources to addressing the problem would be a step in the right direction. I can't see why he can't publicly commit to doing that."

Bloomberg put the spotlight on Google's tax affairs in 2010 when it reported that the internet search giant paid tax at a rate of just 2.4 per cent on the billions of dollars of profits it earned outside the United States. 

The Dominion Post had revealed in June 2010 that Google New Zealand expected to pay just $7726 tax in respect of its previous financial year - less than the average teacher or construction worker. 

Google does not break out its revenues outside the US and Britain, but it is understood it sells about $150 million worth of advertising to New Zealand customers annually. 

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However, only a small proportion of that is booked as revenue attributable to its New Zealand subsidiary, from which its local profits are calculated.

Reuters reported that the Australian crackdown followed a push by Britain and Germany to make multinational companies pay their "fair share" of taxes.

Australia's Assistant Treasurer David Bradbury cited Google Australia as the type of operation it was seeking to target.

- BusinessDay.co.nz

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