By Tova O’Brien with NZN
The Labour Party is accusing internet giants Facebook and Google of paying too little tax in New Zealand.
It’s blaming what it says are the Government's lax tax systems which give rise to “legitimate tax avoidance”, and after similar cases in Britain the Government's now saying there is cause for concern.
Just last month Facebook was celebrating hitting 1 billion users – nearly 2.2 million of them are here in New Zealand. But the tax books suggest the company isn't making money here and is paying little tax.
Figures from the Parliamentary Library show that in the year ended December 31, 2011, Facebook New Zealand received $427,967 in revenue from services provided, with that revenue coming from Facebook Ireland Ltd.
The company's total expenses were $494,663, resulting in a loss of $66,696 before tax.
It paid tax of $14,497, posting an after-tax loss of $81,193 for the year.
Labour MP David Clark says the figures show the multibillion-dollar US-based company is funnelling its revenue through countries with low-tax systems.
"It appears Facebook is using the 'double Irish' tax technique. That's where it uses Irish Facebook, which pays just 12.5 percent tax, to determine revenue and expenses."
"This ensures the company can put most of its revenue through countries with low-tax systems."
In 2010, Facebook's New Zealand tax bill was just $5,238, according to the figures.
"For a company that has 2.2 million users in New Zealand and makes billions worldwide, that's barely believable," Dr Clark says.
While Australia is bringing in new laws to crack down on such tax avoidance, the New Zealand Government isn't even considering it, he said.
"Peter Dunne doesn't realise that New Zealand is beginning to get a reputation as something of a see-no-evil tax haven."
The figures also show Google New Zealand paid just $109,038 tax on $4,447,898 of revenue in 2011 – less than 2.5 percent tax, when the corporate tax rate is 28 percent.
"These companies should pay the right amount of tax here. That's only fair," Dr Clark said.
"For Peter Dunne to wash his hands of the issue is simply not good enough."
Last month, British media reported accusations Facebook had depressed its sales figures there, after paying £195,890 (NZ$380,827) in tax on revenue of £20.4 million.
Tax analysts told The Guardian they believed Facebook had booked its estimated £175m in sales through its Irish arm to pay lower taxes.
Just last month the Revenue Minister Peter Dunne denied New Zealand was a tax haven, instead calling it "legitimate tax avoidance".
“I think the term tax haven is a gross exaggeration because it implies illegality, it implies evasion – rather than legitimate tax avoidance,” he says.
But now after Google, Amazon and Starbucks have been accused of similar tax avoidance in Britain he was less forgiving.
3 News asked Facebook New Zealand to respond to the accusations, but it didn't get back to us.
Globally it's a multi-billion dollar revenue maker, but here it's operating at a loss, raising questions about so called “legitimate tax avoidance”.
3 News / NZN