New legislation, which is intended to tighten the accountability standard for multinational companies, was introduced to Parliament last week. This follows moves in Australia to tighten the tax rules for multinationals operating there.
The move comes as Facebook announces that it will book its New Zealand advertising sales in New Zealand rather than Ireland where it has its international base. Other large multinationals such as Google and Microsoft have not indicated whether they would follow suit.
For years there has been concerns about how much tax large multinationals are paying in New Zealand, how honest their accountants are and whether the required level of transparency around them is appropriate. Some companies have been accused of paying no tax at all in New Zealand in particular financial years. Apple for example admitted in April 2017 to paying no tax in New Zealand for a decade, despite making sales of N.Z.$4.2 billion over that period.
Similarly with Facebook, questions arise as to how much Facebook should be really paying in New Zealand, following revelations that its stated revenue in New Zealand was $1.2 million for 2014. These get more interesting when a Wellington cafe showed reporters its bill, which recorded it as having spent $100,000 on advertising or slightly less than 10% of all profit Facebook New Zealand claimed. A
Failure to pay tax on the scale that Apple has, should result in a fine equivalent to the unpaid tax, plus a fine of say N.Z.$5 million for every year it failed to pay tax. In the case of Apple, this could be construed as willful tax dodging at its finest.
How many major surgeries in hospitals could be paid for if Apple, Facebook and other multinationals had paid its full tax bill in full and on time? How much Government debt could have been paid off, or how many new police officers could that have paid for?
Facebook and Apple, like other multinationals will have overseas subsidiaries whom they will try to reroute profits that they do not wish to be subject to the taxman. These will have links to known tax havens such as those in the Cayman Islands.
Each year I spend a few hundred dollars on advertising for my blog on Facebook. I am just one of scores of New Zealanders who would be using Facebook’s advertising services. I suspect that the amount spent by New Zealand businesses promoting themselves and their products on Facebook are significantly more than what Facebook is admitting to.
Dodgy accounting? Or plain dishonesty.
I’ll let you judge.