Google NZ's missing millions

Google New Zealand posted a loss of $12,000 in 2008 despite more than doubling its revenues to $3.4 million.

The company is one of a number of high-tech firms, that also include Microsoft and Dell, that bills New Zealand customers from overseas, some say in order to avoid paying significant local tax.

The subsidiary is paid a commission on sales, designed to cover its legitimate expenses. Profits are effectively booked by Google in Ireland, where the rate of corporation tax is just 12.5 per cent.

Google has come under fire in Britain and Australia for the practice, which it says is not uncommon. British newspapers reported Google paid just 600,000 (NZ$1.5m) tax on local revenues of 1.2b. In Australia, Google paid tax of A$3.9m (NZ$5m) on estimated "revenues" of $600-$800m. In New Zealand, it paid just $75,000 in taxes.

New Zealand businesses last year spent $59.7m on online "search and directory" advertising, according to the Interactive Advertising Bureau. The segment is believed to be dominated by Google.

"The internet is a global medium that makes a substantial contribution to the New Zealand economy, including helping small and large Kiwi businesses reach users around the world," says Google spokeswoman Annie Baxter.

"We account for our New Zealand operations in New Zealand and pay all necessary income, payroll and indirect taxes. These arrangements are very standard and comply with well-recognised local tax requirements and guidance."

Google New Zealand paid out $2m in employee benefits last year. That will fall by a quarter this year, following a decision to centralise sales in Sydney.

- © Fairfax NZ News