Facebook NZ has reported its profit jumped by a third for the 12 months to December 31, 2023. Photo / Getty Images
Facebook NZ has reported its profit jumped by a third for the 12 months to December 31, 2023. Photo / Getty Images
Facebook NZ has reported its profit jumped by a third for the 12 months to December 31, 2023 - albeit in the context of reported revenue that was again dwarfed by payments to a sister company in lower-tax Ireland.
The firm is part of the Mark Zuckerberg-founded Meta, which alsoowns Instagram and WhatsApp, among other properties.
In June 2019, then Finance Minister Grant Robertson and then Revenue Minister Stuart Nash proposed a digital services tax (DST) that would impose a flat 2 or 3 per cent levy on a tech multinational’s NZ revenue.
The policy followed the UK adopting a 2 per cent DST and the 3 per cent DST imposed by Spain, France and Italy, plus proposed digital services taxes in Australia and the EU (which ultimately abandoned their DST proposals).
However, the idea was put on the backburner in favour of waiting for a long-in-gestation OECD-wide measure - until it was eventually revived in August 2023 with the introduction of the Digital Services Tax Bill for a 3 per cent tax on Big Tech firms’ NZ revenue.
The bill was introduced shortly before Parliament rose for the 2023 election, and never made it to its first reading.
Then National technology spokeswoman (and now Technology Minister) Judith Collins told the Herald she would not have supported the bill.
MFAT saw retaliation
If the measure had passed, it was expected to raise around $90m per year.
But MFAT officials warned New Zealand could face close to $100m in retaliatory tariffs.
“When the US announced its intention to impose tariffs on France in response to their DST, these were valued at US$325 million, compared to estimated DST revenue of US$567 million,” MFAT officials said.
The officials recommended NZ give OECD “beps” (base erosion and profit-shifting) talks (which began in 2016) more time.
Don Christie, cofounder of NZRise, which represents local IT services firms, said the amount generated by the DST would have been a “drop in the ocean”.
Christie said the Crown already had the tools to level the playing field. It just needed to lift its game enforcing current tax and content laws - and procure more services from locals.
Despite Collins being cool on a DST, Meta and its peers face a potential landscape shift with the Fair Digital News Bargaining Bill (introduced by the previous Government) still in play.
A select committee is due to report on the legislation shortly. New Media and Communications Minister Paul Goldsmith told the Herald he was getting advice on the bill. He said one limitation was its failure to deal with AI’s use of news content.
Headcount reduction across the Tasman
Facebook NZ did not detail staff numbers in its financials.
Facebook Australia - which also filed results this week - said its local headcount had fallen by 16 per cent from 156 to 131.
Globally, the firm laid off around 20,000 people over 2023, roughly one in five of its workforce.
Analysts said the move was partly associated with over-hiring during the pandemic, and partly related to a shift in focus from the virtual reality “Metaverse” to AI.
The social network’s Australian operation sent A$1.14 billion offshore - A$100m more than 2022 - mostly to Meta’s subsidiary in Ireland as its reported revenue fell to A$209.0m from A$224.6m in 2022. After-tax profit was A$47.1m from A$34.7m in 2022.
Facebook founder Mark Zuckerberg introduces the latest Ray-Ban Meta smart glasses during the tech giant's Connect developer conference in September 2023 in California. Photo / AP
Worldwide, Meta made a net profit of US$39.1b for 2023 from US$23.2b in 2022 or revenue of US$134.9b vs 2022′s US$116.6b.
A strong start to 2024 meant the firm paid its first ever dividend in the first quarter - good news for the NZ Super Fund which, despite participating in an unsuccessful Christchurch Call-related campaign to change Meta governance, maintains a sizeable stake in the firm (worth $330m at its most recent disclosure).
Collins and Revenue Minister Simon Watts have been approached for comment on Facebook NZ’s results, and any measures in the works regarding multinationals’ financial reporting.
Meta responds
“Meta pays taxes as required in every country that we operate, including New Zealand,” a Meta spokesperson said.
“We have always paid income tax in accordance with New Zealand’s taxation laws. We take our tax obligations seriously and proactively engage with the Inland Revenue Department to ensure transparency in the taxes we pay in New Zealand, and we remain committed to supporting local communities and businesses in New Zealand.”
Chris Keall is an Auckland-based member of the Herald’s business team. He joined the Herald in 2018 and is the technology editor and a senior business writer.
