web analytics
The Standard

NRT: Taking on our local tax cheats

Written By: - Date published: 10:37 am, November 30th, 2012 - 26 comments
Categories: capitalism, economy, International, national, tax - Tags: , , ,

From the indefatigable I/S at No Right Turn


Taking on our local tax cheats

overseas, governments and media are asking increasingly annoyed questions about tax cheating by multinational companies such as Starbucks,Apple, and Facebook. Now Labour joined the campaign, and has taken up the cry locally:

Facebook New Zealand paid just $14,500 tax – give or take a few dollars – last year, making a mockery of Peter Dunne’s refusal to consider closing tax loopholes for multinationals, says Labour’s Revenue spokesperson David Clark.

“The New Zealand arm of the world’s most used online search tool, Facebook, paid only $14,497 in tax last year.

“In 2010 its tax bill was a mere $5,238. For a company that has 2.2 million users in New Zealand and makes billions worldwide, that’s barely believable.

“It appears Facebook is using the ‘double Irish’ tax technique. That’s where it uses Irish Facebook, which pays just 12.5% tax, to determine revenue and expenses. This ensures the company can put most of its revenue through countries with low-tax systems.

“Peter Dunne calls that ‘legitimate tax avoidance’. I call it a rort.

Clark is right – it is a rort. And it is not one we should accept. Across the Tasman, the Australian government is planning to close the loophole which allows these companies to export these profits tax-free. But Peter Dunne has no plans for us to follow suit, and his past public statements suggest he supports tax evasion.

Tax cheats steal from us all. Every dollar they save in tax from these tricks is a dollar we have to pay, borrow, or cut – a dollar we don’t get to spend on schools, hospitals and state houses. The government should make these companies pay their fair share. And if the present government refuses to do so, because they are on the side of the tax cheats, we should elect one that will.

26 comments on “NRT: Taking on our local tax cheats”

  1. karol 1

    Up on Stuff in the last half hour, Dunne seems to be responding with a request for information.  Doesn’t mean he’ll recommend action though.
     

     Revenue Minister Peter Dunne has asked for an urgent report on tax avoidance by multinationals….

    Dunne said he had asked officials to report to him urgently on “both the implications for New Zealand of the steps other countries are taking, and also the options available to us here”.
     
    “I am expecting to receive that advice soon, and the Government will then consider what should be done,” he said.

    • David H 1.1

      Or it could be the beginning of yet another screeching Uturn.

    • Draco T Bastard 1.2

      It will be Dunne starting the sensible conversation that will result in some changes that will, essentially, be the same thing in different words.

  2. Herodotus 2

    Whist agreeing in his sentiment.
    David undermines his position by getting turnover confused with profit and his calculation in the tax rate (If the report has been reported correctly !!)

    He said Google New Zealand was also “funnelling revenue” through its low-tax Irish counterpart, paying only $109,038 tax on $4,447,898 in revenue last year.

    “That’s two per cent, way below our 28 per cent corporate rate.

  3. Ennui in Requiem 3

    When St Peter greets newly departed souls at the Pearly Gates he decides their eternal fate by reading from the Book of Life. It is quite clear that the book does not distinguish between personal and corporate tax cheating….it quite clearly judges the the owners of corporate shares to be personally responsible for cheating Caesar. All sin is ascribed to a person (a soul), corporates quite clearly are not people, they have no soul so cannot sin. Clearly they are owned by sinners.

    • Rogue Trooper 3.1

      Dark and Foreboding and all through the house…not a Rat was registered, just shooting for “Grouse!”

      • Ennui in Requiem 3.1.1

        We have no past, present or future here in Purgatory, eternity is just that, beyond time, through a glass darkly…no foreboding,only boding! And the boding is bad for earthly rats, St Pete has them truly registered. Grouse eh!!!

    • Mike 3.2

      However, under statute law, corporations are persons. They have all of the legal rights of natural persons with none of the attached moral and ethical considerations to worry about. We have allowed the legal system to require corporations to ensure their primary responsibility as legal ‘persons’ is to the shareholder and to maximise the return for the shareholder. That’s why I shake my head when I hear people protesting about companies putting profit before people. Yes it is entirely wrong to put profit before people, but there is no point in taking companies to task, they are only doing exactly what they are designed to do and are required to do by law. It is those who make the statutes that are to blame.

  4. Rich 4

    We need a different tax basis.

    I suggest setting an expected profit margin on a per-sector basis. Large companies would be expected to account for their turnover and taxed on the expected or actual profit, whichever’s higher. Where a business is genuinely growing and investing in NZ, it could get a dispensation for a limited period (up to 5 years) but would be expected to start making normal profits after that. Where the point of delivery is ephemeral (like advertising-based websites) the basis would be global turnover times customers in NZ.

  5. tracey 5

    A minister of revenue who in his fourth year asks for this information, its a joke.

    There is no will.

    A company can pay its lawyers over 100,000 from non company funds, lose the case, wind up the company and pay nothing. How about this law chanfe. If a company pays to defend itself from non company funds the judgment and costs can be sought from tge directors personally and trust of which they are trustee or settlor. Simple, but it wont happen. 39m each year of welfare fraud is nothing compared to these rorts, perhaps labour could make a meme from this.

  6. tracey 6

    Eir, it cld be done so easily too. For example builders and designers are now personally liable for problems for ten years. But not developers, not councils… There is no will.

  7. tracey 7

    Has anyone notice that profit announcements often are phrased as profit is down x % … Makibg it seem like the company has done poorly, poor company. Actually its still in profit. You find it with banks alot.

  8. ianmac 8

    According to a chap on Morning Report the trouble is that these entities are not bricks and mortar but are mostly intellectual property which is very difficult to identify let alone tax. He thought it would need a concerted international response.

    • insider 8.1

      IP can be taxed if there is a claim for its value and payments are made for it, just like bricks and mortar. Transfer pricing is a well known and monitored in other areas where pricing benchmarks are well established, even for professional services (eg lawyers and accountants) as well as steel and oil.

      Maybe the issue is identifying the true ‘value’ of that IP and associated licensing arrangements. I believe IRD has pretty wide powers to deem a value if it feels the commercial boundaries are being pushed.

    • Rich 8.2

      So you simplify it:
      – global revenue $4bln
      – NZ customers 2mln / 1 bln = 0.2%
      – NZ imputed revenue $8mln
      – Imputed profit 25% = $2mln
      – Tax due = 28% x 2mln = $560k

      • Policy Parrot 8.2.1

        Transfer pricing is a legal way to conduct business affairs. Its ostensible purpose, under the aegis of instrinsic motivation, is to make sure that managers are rewarded/punished in line with their actual performance, and not held accountable for things that they cannot control for – i.e. currency fluctuations etc.

        However, in the last twenty, especially ten years, transfer pricing has become a convenient way to minimise tax by minimising business unit profit in high tax jurisdictions and maximising in low tax jurisdictions. It is something will be hard to develop anti-avoidance measures for – the only possible solution is to harmonise international business tax rates.

        Remember, any tax system has to be arbitary, i.e. rules (and not case) based. The other potential easy adjustment that a future Minister of Revenue (lets face it, Peter Dunne wont do this) could do is to have the higher of:

        A. Either the assessed tax as per current (28% of gross profit).
        B. The equivalent NZ$ market value of the previous year’s CEO’s remuneration package.

        Sure, it might not recover as much as we probably should if the companies were operating under the spirit of the tax laws, but any extra remuneration to the boss would mean extra revenue for the state. Note for Google (NZ), that would mean a tax bill of NZ$130 million (for just 2012/13 alone). However, companies will likely change their remuneration policies, so such largesse should not be anticipated.

        • Draco T Bastard 8.2.1.1

          It is something will be hard to develop anti-avoidance measures for – the only possible solution is to harmonise international business tax rates.

          No it isn’t and no it doesn’t.

          One of the reasons why businesses get tax deductions on expenses is because the expense is often paid to another business and so will be taxed anyway with the government, in theory, losing very little tax. But things have changed. That used to be the case when it was guaranteed that the tax deducted expense was paid to a business in the same country which is no longer true.

          This leads to two changes:
          1.) All income from NZ will be taxed at NZ tax rates (and I think companies should be on PAYE as well and not have a flat tax rate far below what individuals pay)
          2.) Business expenses that get paid to businesses (including branches of the same business) outside of the country are not tax deductible.

          Tax that we charge are to support this country. Having internationalised companies avoiding paying those taxes is puts excess stress on the companies and individuals in this country.

          • Policy Parrot 8.2.1.1.1

            It is something will be hard to develop anti-avoidance measures for – Thinking in the same box, it is. Thinking outside the box obviously has different results. I am not confident about the chances of international collaboration on business tax rates either, some countries will have a lot to lose.

            Draco – while I admire sentiment – ultimately the tax system has to be arbitary. And by moving to tax income/revenue, it wont be arbitary anymore – naturally high margin firms will be favoured over those with low margins. And there are whole industries (e.g. airlines) that operate on a tiny percentage (legitimately) of profit. And then there is the whole issue whether we want to reward those (relatively) who are more likely to gauge more from their customers.

            The other alternative is for the IRD to be involved in the setting of transfer prices (again, issues with arbitary treatment). Still think the idea of setting the tax bill as equivalent to the ulimate CEO’s remuneration is an idea worth pursuing.

            Addendum: Any discrimination against foreign firms may just increase costs for local consumers, and also penalise those who are forced through no option to look overseas for sourcing components etc.)

    • vto 8.3

      ” the trouble is that these entities are not bricks and mortar but are mostly intellectual property which is very difficult to identify let alone tax”

      man some people get away with twaddle don’t they? How is that any different from the intellectual property that you get when you see your solicitor or accountant? It’s not. There is a charge and so there should be a tax. Just like those of us out here in lalaland – if only I was some intellectual property which only existed in cyber space ……..

  9. tracey 9

    Ianmac, it always comes down to will. It was easy enough to change labour laws under urgency

    • Jim Nald - Once Was National 9.1

      “it always comes down to will”

      Yeah, well, on issues of these kind for NACT-Dunne,
      it is not a matter of political “will” and should turn out to be “won’t”.

Recent Comments

Recent Posts

  • Key’s threat to veto premature
    John Key’s threat that he might use a financial veto against the Bill that will introduce 26 weeks Paid Parental Leave is premature and based on inflated costings, says the bill’s sponsor, Labour ‘s Sue Moroney.  “The Government keeps saying… ...
    7 hours ago
  • Reflections on the plastic bag tour
    After a marathon public tour around New Zealand that took me to 29 different places around New Zealand from the far north of Kaitaia to the deep south of Invercargill to talk about phasing out plastic bag use, I wanted… ...
    GreensBy Denise Roche MP
    7 hours ago
  • Labour celebrates Tongan language and diversity
    Tongan Language Week is a timely reminder of the importance and beauty of our Pacific culture, identity and language in New Zealand, says our first Tongan born, Tongan speaking MP Jenny Salesa.  The theme for Tongan Language Week in 2015… ...
    10 hours ago
  • Privatising CYF about ideology not care
    John Key’s suggestions today that Child Youth and Family could be privatized will be a terrifying thought for New Zealanders already dealing with the mess created in private prisons and plans to sell our state houses to Australians, Opposition Leader… ...
    11 hours ago
  • Govt must make most of Jetstar competition
    Government agencies should pledge to always buy “the best fare of the day” to maximise competition between Jetstar and Air New Zealand and ensure savings for taxpayers while boosting services to regional New Zealand, Labour’s Transport Spokesperson Phil Twyford says.… ...
    12 hours ago
  • Time for inquiry into petrol margins
    It’s time for an inquiry into petrol companies as margins are once again at the high levels that prompted concerns late last year, says Labour's Energy Spokesperson Stuart Nash. "Over the December January holiday period, petrol importer margins jumped to… ...
    3 days ago
  • More talk as Auckland congestion worsens
    The main impact of the Government’s agreement with Auckland Council today will be simply to delay still further decisions needed to relieve the city’s traffic congestion, says Labour’s Auckland Issues Spokesperson, Phil Goff. “Government has been aware for more than… ...
    4 days ago
  • Serco inquiry extended
    A two month delay to the Government investigation into prison fight clubs shows the extent of problems within the Serco circus, says Labour’s Corrections spokesperson Kelvin Davis. “My office received a tsunami of complaints so I’m not surprised the terms… ...
    4 days ago
  • Truck Shops ignore consumer laws
    A damning Commerce Commission report out today highlights the failure of the Government to protect poor and vulnerable families from unscrupulous truck shops, says Labour’s Consumer Affairs Spokesperson David Shearer. “The report found that 31 out of 32 firms it… ...
    4 days ago
  • Taihoa at Ihumatao says Labour
    Labour’s housing spokesperson Phil Twyford has called on the Government to rethink its controversial Special Housing Area in Māngere. Auckland Council is today meeting to discuss the development which borders the Otuataua Stonefield Historic Reserve. This project is to get… ...
    4 days ago
  • Figures suggest National deliberately excluded farming
    Figures showing the dairy industry would be categorised as high risk if there were a further five severe injuries within a year, strongly suggests National designed its flawed system to deliberately exclude farming, Labour’s spokesperson for Labour Issues Iain Lees-Galloway… ...
    5 days ago
  • Bleak report on the state of our children
    A damning conclusion by the Children’s Commissioner today that ‘we don’t know if children are better off as a result of state intervention, but the indications are not good’ should make fixing CYFs a top priority for this Government, says… ...
    5 days ago
  • Dodgy data used to justify axing KiwiSaver kickstart
    National’s agenda to run down KiwiSaver has become even clearer from a scathing critique of the Government’s justification for axing the $1000 kickstart, says Labour’s Finance spokesperson Grant Robertson. “Since National came to power they have not only continually undermined… ...
    5 days ago
  • Unsecure website risks Ashley MoBIEson hack
    Experts have raised security concerns that vulnerabilities in MoBIE’s half million-dollar website could lead to a possible Ashley Maddison-style hack, says Labour’s Economic Development spokesperson David Clark. “The real issue here is not what data is immediately available, but what… ...
    5 days ago
  • Democracy still the loser in Canterbury
    The Government has demonstrated once again how arrogant and out of touch it is in denying Cantabrians the same democratic rights as the rest of the country, says Labour’s Environment spokesperson Megan Woods.  “The Environment Canterbury Bill which has been… ...
    5 days ago
  • Waiver cost still a mystery
    The Government still has no idea what it’s going to cost community and voluntary groups to get a waiver from the fees police will charge to carry out checks on their staff and volunteers, says Labour’s Community and Voluntary spokesperson… ...
    5 days ago
  • China exports fall 27 per cent in a year
    Exports to China have fallen by 27 per cent over the last 12 months - showing that the looming economic slowdown should have been expected by the Government, says Labour’s Economic Development Spokesperson David Clark. “The Chinese economic slowdown should… ...
    5 days ago
  • National should support all families for 26 weeks
    Families with multiple babies, and those born prematurely or with disabilities, are the winners from moves to extend paid parental leave to 26 weeks but the Government must give all babies the same head start in life, Labour’s spokesperson for… ...
    6 days ago
  • National’s health and safety shambles puts school camps at risk
    Reports that schools are considering scrapping student camps and tearing out playgrounds highlights just how badly National has managed its health and safety reforms, Labour’s Education spokesperson Chris Hipkins says. “Schools have been left completely in the dark about the… ...
    6 days ago
  • National’s asset stripping agenda hits schools
    National’s fire-sale of school houses and land is short-sighted, mean-spirited, and will have huge unintended consequences that we will pay for in years to come, Labour’s Education spokesperson Chris Hipkins says. Documents obtained by Labour show the Ministry of Education… ...
    6 days ago
  • Takahe massacre supposed to get all New Zealanders involved in conservation
    The Minister’s claim that a  botched cull of one of New Zealand’s rarest birds was a way of getting all New Zealanders involved in conservation is offensive and ludicrous, Labour’s conservation spokesperson Ruth Dyson says.  “An email from Minister Maggie… ...
    6 days ago
  • Serco circus rolls on with revelations of fight club practice
    Further revelations that a Serco prison guard was coaching inmates on fight club techniques confirms a fully independent inquiry needs to take place, says Labour’s Corrections spokesperson Kelvin Davis. “The Minister’s statement today that a guard was coaching sparring techniques… ...
    6 days ago
  • Government targets put ahead of students’ education
    The Government must urgently reassess the way it sets NCEA targets after a new report found they are forcing schools to “credit farm” and are undermining the qualification, Labour’s Education spokesperson Chris Hipkins says. “A PPTA report released today says… ...
    6 days ago
  • ER patients in corridors as health cuts bite
    Patients are being forced to wait for hours on beds in corridors as cash strapped hospitals struggle to keep up with budget cuts, says Labour’s Health spokesperson Annette King. “People coming to the emergency room and being forced to wait… ...
    6 days ago
  • Not too late to fix Health and Safety for New Zealand’s workers
    The Government and its minor party supporters are showing an arrogant disregard for workers’ lives by not agreeing to a cross-party solution to the botched Health and Safety bill, Opposition leader Andrew Little says. “Yesterday I wrote to the Prime… ...
    7 days ago
  • Speech to the New Zealand Council of Infrastructure Development
    Tēnā Kotou Katoa. Thank you so much for having me along to speak today. Can I begin by acknowledging John Rae, the President, and Stephen Selwood, the chief executive of the Council for Infrastructure Development. ...
    1 week ago
  • Reserve Bank points finger at Govt inaction
    In scathing criticism of the Government’s inaction, the Reserve Bank says Auckland housing supply is growing nowhere near fast enough to make a dent the housing shortage, Labour’s Housing spokesperson Phil Twyford says. Reserve Bank deputy governor Grant Spencer today… ...
    1 week ago
  • Chickens come home to roost on climate change
    The Government’s gutting of the Emissions Trading Scheme has caused foresters to leave and emissions to rise, says Labour’s Climate Change spokesperson Megan Woods. “The release of the Environmental Protection Agency’s Facts and Figures Report for 2014 on the ETS… ...
    1 week ago
  • Website adds to long list of big spends at MBIE
    The Ministry of Business, Innovation and Employment’s $560,000 outlay on its new website is further evidence of excessive spending by Steven Joyce on his pet project super ministry, Labour’s Economic Development spokesperson David Clark says.  “Hot on the heels of… ...
    1 week ago
  • Brownlee warned over EQC repairs but ignored them
    Gerry Brownlee was warned that EQC’s underfloor repairs weren’t being done properly by industry experts, the cross party working group and in public but he arrogantly ignored them all, says Labour’s Earthquake Commission spokesperson Clayton Cosgrove.  “Today’s apology and commitment… ...
    1 week ago
  • Serco wants in on state house sell off
    The Government must keep scandal plagued outsourcing company Serco away from our state housing after their disastrous record running Mt Eden prison, Labour’s Housing spokesperson Phil Twyford says. "Today it has emerged that at the same time Serco was under… ...
    1 week ago
  • Come clean on Pasifika education centre
    Minister Peseta Sam Lotu-Iinga needs to come clean and tell the Pasifika communities if he’s working to save the Pasifika Education Centre or shut it down, Labour’s Pasifika spokesperson Su’a William Sio says.  “I’m gutted the Pasifika Education Centre funding… ...
    1 week ago
  • Time for NZTA to work on alternatives to flyover
    The High Court decision rejecting the New Zealand Transport Agency’s attempts to build the Basin Reserve flyover must now mean that NZTA finally works with the community on other options for transport solutions in Wellington, Grant Robertson and Annette King… ...
    1 week ago
  • Shiny new system leads to record truancy
    Record high truancy rates shows the Government’s much-vaunted new attendance system is an abysmal failure, Labour’s Education spokesperson Chris Hipkins says. “Data released today shows truancy rates have spiked more than 15 per cent in 2014 and are now at… ...
    1 week ago
  • Woodhouse wrong about quarries
      The Minister for Workplace Relations and Safety Michael Woodhouse was wrong yesterday when he said limestone quarries were covered by the farcical Health and Safety legislation, says Labour’s Associate Labour spokesperson Sue Moroney.  “He said he ‘understood’ limestone quarries… ...
    1 week ago
  • Taxpayers money spent on culling one of our rarest birds
    It beggars belief that four endangered takahe were killed by incompetent cullers contracted to the Department of Conservation and the Minister must explain this wanton destruction, says Conservation spokesperson Ruth Dyson. “It must not be forgotten that there are only… ...
    1 week ago
  • Housing NZ must immediately move family
    Housing New Zealand must immediately move a Glen Innes family whose son contracted serious and potentially fatal health problems from the appalling condition of their state house, Labour’s Housing spokesperson Phil Twyford says. “Te Ao Marama Wensor and community workers… ...
    1 week ago
  • No understanding of the value of overseas investment
     The Government has now admitted it has absolutely no idea of the actual value of foreign investment in New Zealand, says Labour’s Land Information spokesperson Stuart Nash.  “It is crucial that the Government starts to understand just what this overseas… ...
    2 weeks ago
  • Another bridges bribe from Simon Bridges
    Simon Bridges is embroiled in another bridges-for-votes controversy after admitting funding for a replacement bridge in Queenstown is “very much about… the 2017 election”, Labour’s Transport spokesperson Phil Twyford says. “The Transport Minister is today reported as telling Queenstown locals… ...
    2 weeks ago
  • Saudi tender process reeks of SkyCity approach
    The tender process for the $6m investment in a Saudi sheep farm reeks like the SkyCity convention centre deal and once again contravenes the government’s own procurement rules, says Labour’s Export Growth and Trade spokesperson David Parker. “The $6m contract… ...
    2 weeks ago
  • Maori Party should stand up for workers
    The Government’s proposed Health and Safety Reform Bill does not go far enough to protect those in specific industries with the highest rates of workplace deaths, says Maori Development Spokesperson Nanaia Mahuta. “We are told that Maori workers are more… ...
    2 weeks ago
  • Minister must explain budget blowout
    Māori Development Minister Te Ururoa Flavell must explain a budget blow out at Te Puni Kokiri, after the organisation spent more than 2.5 million dollars over their budget for contractors, says Labour’s Associate Māori Development spokesperson Peeni Henare.  “For the… ...
    2 weeks ago
  • Successful effort to raise the issue of GE trees in proposed standard
    Many thousands of people submitted on the proposed National Environmental Standard –  Plantation Forestry (NES-PF).  A vast majority of the public submissions were particularly focussed on the NES having included GE trees in its mandate. People want these provisions removed,… ...
    GreensBy Steffan Browning MP
    2 weeks ago
  • Fair Share Friday – Thoughts and Reflections
    As part of our Fair Share  campaign, Green MPs have been doing a series of visits to community groups across the country to have conversations about inequality in New Zealand and what communities are experiencing on the ground. I visited… ...
    GreensBy Denise Roche MP
    2 weeks ago
  • Crucial Auditor General investigation welcomed
    The Auditor General’s decision to investigate the Saudi sheep scandal is important, necessary and welcome, Labour’s Trade and Export Growth spokesperson David Parker says. “The independent functions of the Auditor General are a cornerstone of the New Zealand system of… ...
    2 weeks ago
  • KiwiSaver sign-ups continue to fall
    New KiwiSaver sign-ups in July were 45 per cent below the monthly average, despite John Key saying axing the kickstart “will not make a blind bit of difference to the number of people who join KiwiSaver”, says Labour’s Finance spokesperson… ...
    2 weeks ago
  • Contact bows to pressure
    Contact Energy’s decision to cut its pre-pay rates to be in line with its customers who pay monthly is good news and the company deserves credit for responding so quickly, says Labour’s Consumer Affairs Spokesperson David Shearer.  “Two months ago… ...
    2 weeks ago
  • I’m pushing for a ‘fair go’ for solar
    My Fair Go For Solar Bill was pulled from the Members’ Ballot last week and is set for a vote in Parliament. In this blog post I explain some of the background to the bill and how it aims to… ...
    GreensBy Gareth Hughes MP
    2 weeks ago
  • Key must explain why Health and Safety Bill pulled
    John Key must explain why his Government is delaying the Health and Safety Bill when Pike River families have travelled to Wellington specifically to register their opposition, Opposition Leader Andrew Little says. “Yesterday afternoon John Key suggested the bill may… ...
    2 weeks ago
  • Diving for sustainable scallops
    Last week, there were calls for scallop dredging to be banned in the Marlborough Sounds, following scientific report saying that 70% of the Sounds had been lost from dredging, trawling, and sedimentation from forestry. At the same time we see… ...
    GreensBy Steffan Browning MP
    2 weeks ago

Public service advertisements by The Standard

Current CO2 level in the atmosphere