Govt considers tightening tax laws

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Govt considers tightening tax laws

3News NZ

Companies like Google and Facebook are taking advantage of New Zealand tax laws (Reuters)

Companies like Google and Facebook are taking advantage of New Zealand tax laws (Reuters)

The Government's considering whether New Zealand needs to toughen its tax laws amid claims companies like Google and Facebook are taking advantage.

A tax expert who's looked into Google's books says these companies may be rorting the system, but that doesn't mean they're breaking the law.

When New Zealanders advertise to other New Zealanders on Facebook they pay New Zealand dollars but it goes into an Irish account.

“The way Facebook sets up its accounts means it's minimising its revenue flows through New Zealand and that means it pays less tax in NZ, and I don't think that's fair,” says Labour MP David Clark.

The Government's ordered an urgent report into claims against companies like Facebook and Google to see if the laws here need to tightened.

“The question is whether it's legal - we wouldn't let them get away with it if we can stop it, the question is can we stop it?” says Prime Minister John Key.

After tax, Facebook NZ lost $81,000 last year while Google NZ lost $52,000. Compare that to Microsoft, which is worth roughly the same as Google - its profit was $5 million in the year to June.

“They may be completely compliant with New Zealand law that doesn't mean that what they're doing is morally correct and there may be a fairer way for the New Zealand Government to collect their money,” says chartered accountant John Rowe.

But in a statement Google told 3 News the reason its revenue is so low is because it provides services to millions of Kiwis for free.

And Facebook's the same, saying it complies with all New Zealand laws and also makes a significant contribution by providing free services.

So it's come down to a question of what's legal and what's right.

The IRD says it's tricky because these companies have such a limited physical presence here, but New Zealand is likely to follow if there's a global crackdown.

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Comments

3/12/2012 2:15:50 p.m.

Greg wrote:

NZ isnt a democracy its a parliamentary tyranny. Political parties are puppets for their sponsors. The tax laws need toughening up for corporate welfare and banking rorts on property development, overseas investment. The tax bas for hte orking poor needs to be stremlined with the first 15k of income tax free. The will give a massive boost to the economy that top down think spending fails to achieve. The tax laws need a total overal, not just bandaid toughening.

2/12/2012 7:58:17 a.m.

alison wrote:

@zac, very true. When this govt can find a way to put itself in the international limelight it pulls out all the stops. If its anything to do with policy or running the country it has a wait and see attittude. Says it all about them really. I await John Keys movie career in a Peter Jackson directed movie. Perhaps he could play some sort of monster. That shouldnt be hard for him.

1/12/2012 9:59:30 p.m.

Kathy wrote:

And actually Mike international experts agree on the fact that New Zealand is a tax haven infact there are already plans afoot that will see New Zealand entered into the official International tax haven register. In July this year countries around the world woke up to global headlines about the super rich hiding 21 Trillion dollars in tax havens like New Zealand instead of contributing to their respective economies. These people are inherently dishonest like Mike.

1/12/2012 3:26:23 p.m.

zac wrote:

While this do nothing government is considering whether to change the law, companies like the two mentioned gets away with rorting the system. Warner Brothers didn't have to wait for their law change. That was rushed quickly through parliament without following proper process.

1/12/2012 12:05:20 p.m.

Mike wrote:

More Labour revenue=profit.

They claim that Google and facebook should be paying tax on revenue.

Does Ireland tax businesses lower than NZ? Yep.

Irish business tax rate are 10-25%, so of course businesses will move profit to ireland if they can. This is the same as it was under Labour in 2008 but they were in govt then and found it 100% acceptable.

The problem is not tax avoidance, and evasion as tax is being paid. The probelm is greedy countries demanding too much tax, and international arangements to allow profits to be evectively moved around the world. Due to countries like the US demanding 35% business tax rates, Labour claims NZ a tax haven, and due to ireland tax rates between 10% and 25% they now claim NZ a tax haven? When will they get their story straight? The first would encourage to move profits to NZ as our 28% < 35%, and the 2nd would encourage to move profits to the lower irish tax rates - and none of it is a tax haven or tax avodiance/evasion. Its time even '1' Labour MP went to university and learned about tax!

If they claim Google needs to be paying tax on its revenue, then we also have unions in NZ collecting hundreds of millions off hard working NZrs, and they are not paying tax on the revenue amount, so are tax evaders according to Labour, but like over 100x worse than Google! but then unions always have had a dark criminal side. Take the doco just this week on the Melbourne dockers and painters union, and our waterfront unions were not much better. What is Labours solution? Will they jail all the unions in NZ as they are much worse tax evaders than google.

30/11/2012 10:28:34 p.m.

Humvee wrote:

What if Google just decides to turn off the tap to NZ users? That will have been a real own goal. This government has done zero, zip, zilch for New Zealand. What a bunch of bozo clowns.