Foreign firms face tax clash

Labour's finance spokesman David Parker. Photo / Richard Robinson

Labour to get tough with multinationals such as Google over 'aggressive avoidance'

Labour says it will tackle "aggressive tax avoidance" by multinationals such as Facebook and Google which it says is costing the taxman hundreds of millions of dollars each year.

But while Revenue Minister Todd McClay says rules for foreign firms are being tightened, New Zealand should take the lead from the international community on the matter.

Digital giants such as Google, Apple and Facebook have borne the brunt of international criticism of the way many multinational companies structure their affairs to legally minimise their tax bills.

Local concerns were fuelled last year when iPhone and iPad maker and iTunes owner Apple reported paying just $2.5 million on $571 million worth of New Zealand sales in 2012. Google and Amazon's tax bills were also tiny in comparison with their reported sales here.

Labour's finance spokesman David Parker said the issue was particularly acute in advertising where, "the Facebooks and Googles of this world" were competing with local media companies such as the Herald but paid far less tax than local rivals.

"Facebook and Google take hundreds of millions of dollars out of the New Zealand economy through advertising, pay virtually no tax and they do that because they construct their affairs in a way which either says the income isn't earned from New Zealand or if it is, even if it's providing services to New Zealanders they construct arguments and their affairs in a way that they have no New Zealand taxable income."

Labour revenue spokesman David Clark yesterday said: "We certainly think there's a lot of aggressive avoidance going on."

He said the party was continuing a major research project on the issue and would be more proactive than the Government in addressing it through policies likely to be released before the election.

Mr McClay acknowledged the disadvantage suffered by local firms competing with overseas rivals who paid little or no tax here was "the crux of where the real challenge is" in terms of taxing multinationals. Some local tax laws were already being tightened up in line with OECD recommendations last year on base erosion and profit shifting.

Problems around taxing multinationals would be top of the agenda at November's G20 meeting in Brisbane. While Mr McClay said he wasn't particularly optimistic about an outcome from that meeting, "ultimately a number of countries are going to have to come together and consider the best way forward".

Views on base erosion and profit shifting were to have been canvassed in a discussion document late last year but that document has now been postponed and will be released in the next few weeks.

Counting the cost

* $363 million: New Zealand's total online advertising spend 2012
* $140m: The proportion of that earned by search and directories companies, mainly Google and Yellow
* $165,000: Google's 2012 NZ tax bill
* $571m: Apple's 2012 NZ sales
* $2.5m: Apple's 2012 NZ tax bill
* $46.5m: Amazon's 2012 NZ sales
* $1.6m: Amazon's 2012 NZ tax bill.