NZ Government moves to crack down on tax avoidance by multinational firms are bearing fruit. Google and Facebook, which generate hundreds of millions of dollars in NZ, have each confirmed they will cease funnelling New Zealand revenues through low-tax jurisdictions, such as Singapore and Ireland.
Hopefully, this means the NZ Government will receive a fairer share of the tax take which, in turn, benefits the country.
As we noted in June last year, Google 2016 accounts showed minimal tax was paid in NZ. Only $365K tax was paid on a declared income of just $12.6M.
This income was a “service fee” received from parent company Alphabet in return for Google NZ providing marketing services, rather than the actual media charges paid to Google by NZ advertisers.
Those media charges instead have been collected by Google Singapore and (in our view) likely exceed $1M a day. And with 365 days in a year that adds up to way more than $12.6M...
Beyond the tax take benefits, this change should lead to greater transparency on just how much money is being invested in online advertising by NZ businesses.
To date, Google has been notoriously coy about revealing this information. This has meant that IAB estimates of NZ online advertising spend have been best guess estimates based on the declared spend from a sample of advertisers and agencies.
NZ is not the only place where Google and Facebook will be changing how they pay tax. See Taxing Times for Google and Facebook Not Into Sharing When it Comes to Tax
Hopefully other big multinationals who pay minimal tax in NZ, such as Apple, will follow Google and Facebook's lead.
