Taxing multinationals

Written By: - Date published: 9:58 am, December 15th, 2016 - 53 comments
Categories: capitalism, labour, national, tax - Tags: , , , ,

Back in 2013 Labour was arguing that multinational companies should pay their fare share of tax. Then revenue spokesman David Cunliffe wrote:

We all must pay tax – including multinationals

Let me put on record that Labour is not proposing new taxes in this area – we are researching and consulting on a widely recognised challenge: how to protect the tax base, improve transparency and reduce legal avoidance of existing tax obligations by global companies operating within New Zealand.

Our tax system must be fair to all – and that includes multinationals paying their fair share. Because in the end somebody has to pay.

Such mad ideas as asking Apple to pay its taxes were of course ridiculed by The Herald who couldn’t see any value in it, and mocked by National’s pet blogger. As late as March this year National were still dismissing the idea out of hand.

How times change.

Due in part to the excellent work of Matt Nippert at the very same Herald, National have been shamed in to action at last:

Government planning action to target multinationals over tax

The Government is planning unilateral action to crack down on tax dodging by multinational companies, including changing the law, amid growing concern about fairness.

Revenue Minister Michael Woodhouse said proposals outlined in a cabinet discussion document tabled last month would see Inland Revenue properly armed to tackle the problem and could be accompanied by increased enforcement funding for the taxation authority.

(The very same Woodhouse that was so dismissive in March.)

The proposals include granting broader information-gathering powers to Inland Revenue investigators, shifting the burden of proof to multinational companies in disputes over transfer pricing, and tightening loopholes that allow companies to claim they have no taxable presence in New Zealand.

The moves stop short of a full-scale diverted profits tax, as introduced by Australia and the United Kingdom, but Woodhouse refused to rule out such a measure if this new package failed to achieve results.

It’s a good start. But it’s not yet enough:

‘Not far enough’ – Opposition on tax crack down

Opposition parties have welcomed government moves to crack down on tax avoidance by multinational companies, but tempered this support with criticism they come too late and do not go far enough.

The Herald this morning reported a cabinet discussion paper showed an about-face in government policy with plans having been drawn up to unilaterally toughen our tax regime to clamp down on tax leaking offshore.

Both the Labour and the Green parties this morning said they supported the proposed measures, but also pressed for even more action – including lobbying for a diverted profits tax that Michael Woodhouse said would only be implemented if this new policy package failed to deliver results.

Labour Party finance spokesman Grant Robertson said the cabinet discussion document was thin on detail and failed to adequately explain why a diverted profits tax had been taken off the table. …

I/S at No Right Turn writes that the Nats are only pretending to act:

Any action is better than none, but given that other countries have already implemented a diverted profits tax, everyone is already asking why National isn’t planning to as well. And the natural suspicion is that, as with everything else, they’re trying to do as little as possible: enough to get the headline “National cracks down on tax-cheats”, but not enough to actually hurt them and dry up the donations.

But again, its a useful peg in the ground, and allows the left-wing parties far greater room to move. National now openly supports targeting tax-cheats. Which means that Labour and the Greens can give us the real action we need.

Seems like a fair summary.


https://twitter.com/smalltorquer/status/808734875125628928

53 comments on “Taxing multinationals ”

  1. saveNZ 1

    Great post. Something has to be done when the largest turnover companies in local countries can avoid paying taxes. As well as the tax avoidance that means the taxpayers are short changed it also then discriminates against companies who actually pay their taxes and have to compete against a company that pays little to nothing against often larger companies with massive resources in marketing and branding and lobbying to get further deals out of government.

    The main thing that needs to be undated in my view is that people and companies need to all be taxed at source before the money can be maximised for avoidance. Most taxes in NZ are easy to avoid for companies and trusts because they rely on profits rather than turnover in which profits are easy to manipulate, or rely on a person’s taxable income which for 40% of the super rich is 0! So the new speculator property tax would be 0 if the person can manipulate their affairs to have no taxable income or run a loss. Maybe all taxes need to be more like PAYE and you get taxed on the amount you earn regardless of all the expenses you incur working.

    It looks like the Diverted Profits tax introduced in the UK is a harder tax to avoid for multinationals.

    The DPT is intended to apply to two broad situations:

    where a foreign company structures its arrangements to avoid creating a UK permanent establishment (“PE”) and, broadly, makes more than £10 million annually in UK-related sales revenues from the supply of goods, services or other property and its UK-related expenses also exceed £1 million. UK-related sales of affiliated companies are included in determining the application of the £10 million threshold where such sales are not subject to UK corporation tax; and

    where entities or transactions (involving affiliated parties) lack economic substance and either involve a UK resident company
    or a UK PE of a foreign company to exploit tax mismatches where it is reasonable to assume that expenditure in the UK would not have been incurred, or taxable UK income would have arisen, but for the tax benefit of the actual arrangements.

  2. Puckish Rogue 2

    So another victory for the left and another reason to vote National, a win-win for everyone yes?

    • Draco T Bastard 2.1

      Vote National only if you want trans-national corporations to continue ripping the country off.

      • Stunned Mullet 2.1.1

        Oh I think multinationals continuing to avoid as much tax as possible will continue regardless of which flavour of government is power.

        • Draco T Bastard 2.1.1.1

          Probably but National will make it easier for them as can be seen by them not putting in place at least one critical part of the regulation needed to prevent them from ripping us off.

      • inspider 2.1.2

        I suggest if you are worried about being ripped off by transnationals you stop making all those in app purchases then draco. You can wait for your powerups; you don’t have to keep playing

        • Draco T Bastard 2.1.2.1

          Ah, no argument against what I said so you went the normal RWNJ ad hominem route and you even made up completely fictional BS to do it.

          Basically, your typical National supporting liar.

          • inspider 2.1.2.1.1

            Your argument seems to consist of repeatedly saying ‘Transnationals’ and ‘ripping us off’ in the same sentence repeatedly. It’s almost religious, and mockery’s the best way to deal with religious nutters.

            • Paul 2.1.2.1.1.1

              Like the cult followers of Ayn Rand, Friedrich Hayek and their religion of neo-liberalism?

            • Draco T Bastard 2.1.2.1.1.2

              No, that would not be my argument. My argument is that the transnationals are already ripping us off and that National appear to be helping them as shown by their attempt to turn us into a tax haven and by not even considering putting in place necessary regulation.

  3. Stunned Mullet 3

    Good job – if the multinationals fail to pay up they should be subjected to a turnover tax to stop their manipulation of transfer pricing.

    Do the Herald’s fine overlords pay their fair share in NZ ?

  4. Draco T Bastard 4

    Labour Party finance spokesman Grant Robertson said the cabinet discussion document was thin on detail and failed to adequately explain why a diverted profits tax had been taken off the table. …

    Probably because National will be ensuring that there are large loopholes for tax to be avoided in the parts that they’re not addressing.

    • saveNZ 4.1

      In addition National well publicised speculator tax to control the property market, rely on taxation of the individuals taxable income so if you are taxed at zero like 40% of the Super rich individuals or many companies while turning over millions then you don’t have to pay!

      Joke, When is a tax not a tax
      Answer – When National ensures that only the rich can avoid it.

      • Gosman 4.1.1

        Why do you care if companies pay company tax? Their owners and employees all pay tax and the company usually pay GST. What particular reason do you need to get more tax from them?

        • Draco T Bastard 4.1.1.1

          Their owners and employees all pay tax and the company usually pay GST.

          Except for the fact that they don’t.

        • saveNZ 4.1.1.2

          Inequality dear Cosman. Society is breaking down now that .01% have much of their capital offshore.

          For example Apple one of the most profitable companies keeps all their profits offshore they don’t even take them back to the US, let alone pay anywhere else at the full rate, (instead they lobby for a sweet deal of say 6% tax on the profits from the US before they deem to pay). So how can anyone compete with that if you actually pay your company taxes. That money is not actually paying any wages or GST equivalent. It’s just stuck in tax havens like the NZ ones, paying 0% tax. Tax has to be fair and it is not an even playing field anymore. Most of their workers live in China and being paid minimum wages.

          Social mobility has stopped. Innovation is stagnant. Real issues are being covered up such as climate change and pollution. etc etc.

          If the workers are getting minimum wages and then the middle have to prop them up with welfare, the 100 million dollar plus companies pay nothing and neither do their rich shareholders or get better deals, then society is broken.

          Soon there is not enough to pay for health, or benefits, or education or superannuation – especially in social democracies when the burden is put more and more on the middle and even worse adding more people to the mix with migration to support.

          • Gosman 4.1.1.2.1

            Ummm… unless Apple keeps money in the company forever (and what benefit does that provide the shareholders) they will eventually have to pay out profits. At that time they pay tax on them. So why do you want them to pay tax at the company level?

        • mikes 4.1.1.3

          “… the company usually pay GST..”

          No company ever ‘pays’ the GST charged on their sales. They simply collect it from consumers and pass it on to the government. They can however claim back all of the GST they pay on their purchases, which most consumers can’t do.

          “Why do you care if companies pay company tax?”

          Fuckwit.

        • Tricledrown 4.1.1.4

          Gooseman because if they paid their fair share of tax you would pay less tax!

  5. infused 5

    You’re not going to affect this at all. And then you will find NZ being taxed over in other countries which will likely drive them out.

    • Paul 5.1

      So what is your solution, infused?

      • Gosman 5.1.1

        Cut company tax around the World to zero.

        • Paul 5.1.1.1

          Of course.
          How will that help gosman?

          • Gosman 5.1.1.1.1

            It will stop companies using transfer pricing to hide profits.

            • Paul 5.1.1.1.1.1

              So without company tax, how do national governments operate?

              • Gosman

                Taxing personal income, consumption and charging businesses for services provided by the State. You still haven’t answered the question why the State should tax business on profits.

                • Paul

                  It’s called a social contract.
                  Businesses need roads, trains, sewers, water, gas, an educated workforce. They only get that if a country provides these.

                  • Gosman

                    I thought the social contract was between the people in the country and the State. The State provides an environment in which citizens are more likely employed and paid higher salaries and in return the people agree to pay for this via their taxes. The nature of the social contract between the two is decided via who controls the government which is decided by the electoral system. As businesses don’t get a vote they don’t have a say in the social contract. Remember the rallying cry ‘No taxation without representation’ ? Why would a business be happy with a social contract where they have no say in it?

                  • Gosman

                    Why shouldn’t businesses pay for the cost of using the services the State provides them?

                    • Paul

                      That is my point.
                      They should pay taxes.
                      Taxes – the price we pay for a civilised society.

                    • Gosman

                      Charge them for the services directly then. Doing so via tax is inefficient and unfair.

                    • Gosman

                      That’s the extent of your counter? That Somalia supposedly has low taxes. We are not even talking about low taxes. We are talking about company tax rate. You still haven’t addressed why a company should pay taxes on profits above paying for the cost of services provided to it by the State. You seem to think there is some sort of social contract between a business and the State when I would argue that only really applies to the State and voters.

                    • mikes

                      For a start it would be immensely complex.

                      Then of course there is the fact that legally a company is a person, with the same rights and privileges as a real human being..

                    • Paul

                      And therein lies the problem.
                      We need to remove that right from corporations.

                    • Gosman

                      I must have missed the bit where a company gets to vote.

                      mikes – given that you think companies are the same as people I suppose you have no problem with them spending huge amounts of money lobbying governments.

                      Paul – as you seemingly think the social contract exists between businesses and the State as well as people and the State why do you object to corporations being legally regarded as a person?

                    • Tricledrown []

                      Companies buy votes goosey

                    • Gosman []

                      Given some people think they are part of the social contract between the State and it’s people it iseems entirely understandable they buy votes given they don’t have any of their own.

                    • One Anonymous Bloke

                      Gossie sweety, I must have missed the part where anything you say can be trusted. Best you shut the fuck up: corporations have their own PR and your input can only make them look bad.

                • Henry Filth

                  The state shouldnt tax companies on profits.

                  The state should tax companies on income.

                  Its easy to have income without profit. Its hard to have profit without income.

                  You seem to believe that companies should not pay for the government services they use. Odd.

                  Why so keen to subsidise the business community fromyour own pocket? And mine.

  6. Duncan 6

    Until there is international agreement on taxation of multinationals, why not calculate revenue derived in NZ as a percentage of global revenue and apply that pro rata to global profit.
    This notional profit can then be taxed at local rates.
    Better than nothing for a start.

    • Gosman 6.1

      Why not just charge international businesses for the services provided by the State?

      • Tricledrown 6.1.1

        They will find new loopholes that corrupt political parties will facilitate

      • Henry Filth 6.1.2

        Given (say) Apple’s record on tax, would you trust it to provide accurate data on the services it uses?

        Your faith in human perfectibilty is touching, but possibly misplaced.

        • Gosman 6.1.2.1

          Apple doesn’t have to provide the details. The government will calculate what they use independent of Apple and present them a bill.

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