Archive: Spark chief executive and managing director Simon Moutter shares his thoughts on multinational companies paying next to nothing on tax. June 2016.
Spark managing director Simon Moutter on why companies need to pay their fair share in tax.
Seeing a news report on the tax minimisation tactics of a certain multinational company prompted me recently to grab my phone and fire off a tweet.
I called out Google for reporting New Zealand revenue of just $10 million, when it invoices many times that amount in local advertising revenue - most of which is routed through an offshore entity to avoid the New Zealand tax net.
My tweet generated a few media headlines - and prompted some people to question why, if I was so concerned, didn't Spark boycott advertising via Google.
Despicable behaviour - posting $10m revenue despite generating $67m annual ad revenue in NZ to offshore entity. https://t.co/5ADb4OKAEm
Let's be clear. I love Google. And Facebook. And Apple. I don't approve of the way they and other multinational companies who operate here avoid paying their fair share of tax, but they have awesome products and services which I use every day. So no, I'm not planning to boycott anyone.
Google, Facebook and Apple have made our world a far better place.
They all thoroughly deserve their phenomenal success, which has seen their combined market capitalisation exceed US$1.3 trillion - almost eight times the size of the entire New Zealand economy.
Let's make something else clear. These companies - and the multitude of others that engage in similar international tax strategies - aren't, to my knowledge, doing anything illegal under current laws.
This will eventually - and, in the view of many, inevitably - change as our Government participates in the OCED's 'Base Erosion and Profit Shifting' (BEPS) project alongside many other countries. But the pace of global initiatives like these, and the associated changes to tax legislation, tend to make progress at glacial speed.
Chief executive Simon Moutter. Photo / Dean Purcell
I've consistently called on our Government to take more progressive action and lead the way on ending the tax dodging, as has already happened in the United Kingdom and Australia. It's making some welcome moves in the area of GST, but this is just scratching the surface - BEPS is the big issue.
And let's be clear on one more thing: multinational companies already have the opportunity today to pay their fair share of tax in New Zealand.
There is no law that forces them to operate with thinly capitalised local companies, to route revenue through offshore entities, or to have massive levels of intercompany expenses to reduce their taxable profits in New Zealand. They make a considered choice when they use such tactics to avoid paying tax here.
Some would argue that companies should always do whatever they can to minimise their costs, be they related to tax or anything else. Others will say if they don't do it, then their competitors will have a financial advantage over them.
A Herald investigation found Facebook was one of the multinational companies most aggressive in shifting profits out of New Zealand and paying virtually no income tax. Photo / Getty Images
I disagree.
Look at how multinational companies have overhauled their global supply chain strategies to address growing social concerns about human rights, child labour or environmental issues. These decisions have often cost them a lot more money - but they have embraced them, as it's simply the right thing to do, and their customers have expected them to do so.
I reckon it's time for Google, Facebook and Apple to show leadership and start doing the right thing on tax in all the markets they serve.
Is it right these companies collectively extract hundreds of millions of dollars of profit each year from the New Zealand economy, yet contribute little or nothing to the funding of a civil society?
And not only that, cause New Zealanders to pay more tax to make up the difference required to fund our schools, hospitals and welfare.
Google is another multinational company found to be paying virtually no income tax. Photo / Getty Images
After all, New Zealanders have embraced these companies and their brilliant products. We've welcomed them to New Zealand and we support them by buying their services.
Isn't it just the right thing for these companies to reward our support by willingly making a contribution to the tax base which funds our society?
Doing this would be relatively simple for them. They could set up their intercompany charges to leave a New Zealand profit margin per dollar of revenue equal to their global profit margin. They'd then pay 28 per cent (the New Zealand corporate tax rate) on this amount to the IRD and we'd all be happy.
So, here's my challenge to the bosses at Google, Facebook and Apple. Ask the Herald for the same space they've just given me and set out your response.
And please don't roll out the "we simply comply with the tax laws" claptrap.
Let's hear your response as to why you're not prepared to reciprocate the support New Zealanders have offered to your companies by making a fair contribution to the tax base that funds our society.
