Business editor at large Liam Dann talks to investigations reporter Matt Nippert on IRD getting tougher on tax.
Inland Revenue has launched a swathe of audits into the tax arrangements of international technology firms after the taxman detected what it described as "anomalies" in their accounts.
While Inland Revenue would not name the companies being scrutinised, citing secrecy provisions in tax laws, four high-profile digital companies - Apple, Google, Facebook and Uber - this week declined to answer when questioned about whether they were currently subject to audit.
Of those that responded to Weekend Herald queries - Facebook, Uber and Google - all stressed they met their tax obligations both in New Zealand and abroad.
News of the crackdown slipped out in a March briefing to Revenue Minister Michael Woodhouse recently obtained under the Official Information Act following a complaint to the Ombudsman.
The briefing, by Inland Revenue's manager of international revenue strategy John Nash, said close monitoring of multinational companies identified "anomalies" and this sort of work had led to "current audits of technology companies".
Speaking to the Weekend Herald Nash confirmed the keen interest of his department in the sector: "I wouldn't even call it a crackdown: It's very much business as usual."
One tax adviser familiar with Inland Revenue's activities in the area said the sector had always been of particular interest but said recent publicity about the issue appeared to have led to increased scrutiny.
"They've had a strong interest in the past few years, but it's probably stepped up in the past six months," the adviser said.
Nash said he was unable to answer questions about the scope of the audits, or how much additional tax had been levied as a consequences.
"I can't answer your questions at this stage - our investigations people are still putting together the numbers," he said.
Inland Revenue manager of international revenue strategy John Nash.
Nash said audits were time-consuming affairs - "It can become fairly intense trench warfare," he said - and would take several years to resolve.
As an example of the extent to which his office would drill down into audit targets, Nash said one of his offices' ongoing probes into a technology company had seen 20,000 emails sent between local and overseas offices seized for analysis.
"The reason for that is we have to establish exactly what has been done in New Zealand, and what has been done in Singapore: And we have to establish the value of the stuff done in New Zealand," he said.
Minister Woodhouse this week said the Government was keeping all options on the table, including whether to follow the lead of Australia and the United Kingdom and impose a diverted profits tax, also known as a "Google tax", to target multinationals unfairly shunting cash out of the country.
"The Government plans to release a discussion document early next year canvassing a number of options for addressing transfer pricing and permanent establishment avoidance. A diverted profits tax is one way to counter [that]," Woodhouse said through a spokesperson.
The March briefing appears to have been called by the Minister in response to publication of the Herald's Tax Gap series which identified a number of apparently highly profitable multinationals that paid relatively minuscule amounts of tax in New Zealand.
The 20 companies most aggressive in moving profits out of New Zealand - a list featuring many technology firms - were found to have booked local revenues of $20 billion but paid only $1.8 million in taxes.
They've had a strong interest in the past few years, but it's probably stepped up in the past six months.
Nash's briefing said the Herald analysis - comparing the profit margins between domestic subsidiaries and multinational parents - was "fundamentally flawed", but conceded it was a "starting point for deeper analysis".
The rapid growth of digital businesses - whose lack of heavy infrastructure has allowed them to relocate and compete from low- or no-tax jurisdictions - has caused concern at governments and boardrooms worldwide.
Spark chief executive Simon Moutter has this year campaigned against what he characterises as unfair tax planning strategies used by online rivals.
While unwilling to comment directly on Inland Revenue's crackdown, Moutter said: "In today's weightless, global economy it's critical that all companies that benefit financially from operating in New Zealand also contribute their fair share towards the tax base that pays for hospitals, schools and other vital government services."
