Polity by Rob Salmond

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Polity: Global behemoths and tax

33 Responses

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  • bob daktari,

    Not sure why oil gets sympathy where tech doesn't... other than its an essential item (currently)

    I am willing to buy that oil companies have a lower profit margin in far flung, spread out New Zealand than elsewhere.

    Replace oil with anything and hey thats NZ

    auckland • Since Dec 2006 • 537 posts Report Reply

  • Rob Salmond,

    @Bob: If you read the rest of that same paragraph, you'll find I don't think the same argument holds for everything.

    Wellington • Since Jun 2015 • 102 posts Report Reply

  • bob daktari, in reply to Rob Salmond,

    the argument holds for most things - other than oil still being essential (for now)

    I'm in the Generalized indignation and Outrage camp - good corporate citizens don't shirk their responsibilities to the communities they serve (and profit from), that includes paying their taxes, not minimising them

    Their behaviour is akin to far to many citizens, who see tax as something to be avoided, and wonder why services get eroded due to lack of govt funding/revenues

    *sigh*

    auckland • Since Dec 2006 • 537 posts Report Reply

  • Kiwiiano,

    I'm willing to believe that Apple does have very meagre margins on their retail prices, they always have. That's why whenever you see the TV ad trumpeting "25% OFF EVERYTHING IN STORE" there's always the fine print at the bottom of the screen "excludes Apple products" and why they're always keen to sell you added warranties, carry bags, etc etc, that's where any profits they hope to make come from. Apple takes the BIG slice of the pie between the Chinese factory and the tax haven where their accountants lurk.
    But then NZ is wide open for being ripped off. Anyone wanna bet we don't eventually see Chinese owned & staffed farms, purchased with loans from Chinese banks @ exhorbitant interest that means the farms are barely viable😨, selling their milk to likewise owned processing plants with immigrant workers @ or near minimum wages, exporting on their own ships to wholesalers at a loss? It's been working in the Tourism industry. If it's not illegal it will happen. That's what predatory capitalism is all about.
    (*

    ChCh • Since Nov 2006 • 46 posts Report Reply

  • Ian Dalziel, in reply to bob daktari,

    Generalized Indignation and Outrage...

    Could this be called GIO politics?
    :- )

    Christchurch • Since Dec 2006 • 7881 posts Report Reply

  • bob daktari, in reply to Kiwiiano,

    there is little margin for the reseller due to the wholesale price from apple hence the sales disclaimers - all the peripherials stores like to sell around idevices are from other manufacturers, apple is very aggressive at keeping all the money

    auckland • Since Dec 2006 • 537 posts Report Reply

  • Peter Davis,

    What I find most upsetting about this whole episode is that we have to rely on a journalist to bring to our attention a fundamental feature of our public policy - namely, a revenue base being eroded in clear view by some very visible actors. We have fully-staffed Treasury and IRD with the requisite analytical skills, public duty and powers to address these issues, and yet we are reliant on a single journalist to bring this to our attention in what is otherwise a much touted failing "mainstream media" (declining ad revenues, digital incursion etc). I can understand how state fiscal custodians might miss this in a developing country or one racked by corruption, but how did they miss it in New Zealand?

    Since Mar 2016 • 7 posts Report Reply

  • Angela Hart, in reply to Peter Davis,

    You're being generous if you think they missed it. They just haven't done anything about it.

    Christchurch • Since Apr 2014 • 614 posts Report Reply

  • Rich of Observationz,

    Oil royalties aren't a business tax though, they're the oil company paying us for the oil, which is ours. We could just leave it in the ground to appreciate in value.

    Back in Wellington • Since Nov 2006 • 5550 posts Report Reply

  • Ian Dalziel, in reply to Rich of Observationz,

    We could just leave it in the ground to appreciate in value.

    True 'nuff! - after all...

    Christchurch • Since Dec 2006 • 7881 posts Report Reply

  • Kumara Republic,

    The same underhandedness is also behind Hollywood accounting. When a film breaks even many times over, the big studios involved are still able to declare a loss on paper and use it to justify shafting the cast & crew. The more savvy Hollywood players circumvent this by insisting on a cut of the gross instead of the net profit. Maybe the same could apply to company tax.

    The southernmost capital … • Since Nov 2006 • 5414 posts Report Reply

  • Simon Lyall,

    This is a story that comes around regularly, John Campbell did it just 6 months ago and it has been done many times before that.

    The important thing is that the 1,2 or 10 people working in New Zealand for Apple, Google or Facebook don't generate all that much added value for the companies. That is all generated by the factories, techies, lawyers and marketing people on the other side of the world.

    The New Zealand office isn't generating 100s of millions of dollars of extra value. They are adding a few million and declaring this to the IRD (who would no doubt keep a close eye on them).

    Trying to extract an excessive amount will result in these companies closing their local divisions overnight. They may even cut other (non sales) jobs in New Zealand out of the fear that hiring a couple of developers will expose them to 100s of millions of dollars of liability.

    Auckland • Since Feb 2007 • 57 posts Report Reply

  • kiwiwolf, in reply to Simon Lyall,

    And no matter what the wrong you can guarantee to find at least 1 kiwi prepared to make excuses for them.
    I wonder if the fact that IRD etc do nothing about it has anything to do with politicians holding shares? or am I being too synical

    Whangaparaoa • Since Sep 2014 • 30 posts Report Reply

  • Swan,

    Simon Lyall, agreed. The question is what is the size of the NZ workforce, and is tje profit declared in proportion to that.

    Birkenhead • Since Feb 2011 • 86 posts Report Reply

  • Rob Stowell,

    In the case of apple, there's "added value" and then there's markup (or pure profit.) It's pretty clear the majority of that comes from sales here.
    And how much of apple's "added value" really comes from Ireland?
    In the case of Google, nz eyeballs ARE the added value. Nz advertisers are the local revenue stream. Google get both for close to nothing tax wise.

    Whakaraupo • Since Nov 2006 • 2090 posts Report Reply

  • Joe Wylie, in reply to Simon Lyall,

    The important thing is that the 1,2 or 10 people working in New Zealand for Apple, Google or Facebook don't generate all that much added value for the companies.

    I guess that depends on how you slice it. For example, the Austrian-based Red Bull GmbH, which must be a significant contributor to Facebook's coffers with over 45 million FB fans, the last I looked owned an upmarket residential property in Queenstown for corporate recreational purposes. I'm sure they're not alone in maximising the advantages of their various business environments.

    flat earth • Since Jan 2007 • 4591 posts Report Reply

  • Simon Lyall, in reply to Rob Stowell,

    In the case of Google, nz eyeballs ARE the added value. Nz advertisers are the local revenue stream. Google get both for close to nothing tax wise.

    Note we are talking about company profit here not GST or other sales taxes (and interesting but different issue).

    How much tax should Google pay New Zealand in the following scenarios?

    1. Google have no presence in NZ. People here pay them $100 million per year in advertising and subscriptions. All payments are to overseas companies.

    2. Google have 5 employees who work from home as programmers. They are paid and employed by the US company.

    3. Google have a sales guy in NZ. He is paid by an overseas company and all sales are to an overseas company.

    4. Google setup a subsidiary in New Zealand. It employees the sales guy but all payments still go to the US company.

    5. Google NZ now directly bills about $50 million/year from the largest NZ customers. It claims costs of $500 k for the local office, $49 million from services from Google US and a profit of $1 million. Another $50 million per year from smaller customers goes directly to Google US from NZers.

    Auckland • Since Feb 2007 • 57 posts Report Reply

  • linger, in reply to Simon Lyall,

    Which if any of those hypothetical scenarios bears any resemblance to reality?

    Tokyo • Since Apr 2007 • 1886 posts Report Reply

  • Simon Lyall, in reply to linger,

    Which if any of those hypothetical scenarios bears any resemblance to reality?

    Google is probably (5) right now but I know of companies that I guess are each of the others. In the past Google was some of the other options. Companies like Facebook, Amazon, Yahoo, Microsoft, Dropbox might be any of them. Traditional companies like Publishers or Media companies where the content is being sold but they have some sort of New Zealand presence might also adopt one of the above.

    Auckland • Since Feb 2007 • 57 posts Report Reply

  • Craig Ranapia,

    I reckon Facebook and Apple are two good cases to make an example of. You don’t necessarily need a law change – more aggressive enforcement of existing laws, including testing grey areas in court, could get us on a good path.

    Which is all very nice, and I don't disagree, as far as it goes. But you actually need to properly resource "more aggressive enforcement" and if you don't, corporations that make hundreds of billions every years from aggressive global tax avoidance will sure as hell pay for a downright feral defence.

    I wonder if the fact that IRD etc do nothing about it has anything to do with politicians holding shares? or am I being too synical

    I think you're being way too cynical, or cynical in the wrong direction. Because I don't see any government going into an election year trying to make the political case for a sharp increase in Vote IRD.

    I'd also note that we're talking about tax avoidance here NOT tax evasion. It's pretty rich blaming civil servants for lax enforcement of a tax code that was all to often deliberately designed to be riddled with "grey areas" from the start.

    North Shore, Auckland • Since Nov 2006 • 12370 posts Report Reply

  • Craig Ranapia, in reply to Peter Davis,

    We have fully-staffed Treasury and IRD with the requisite analytical skills, public duty and powers to address these issues

    But you know what Treasury and the Inland Revenue Department does NOT (and never should have) the public duty or powers to do? Write tax legislation.

    North Shore, Auckland • Since Nov 2006 • 12370 posts Report Reply

  • Don Christie,

    Thanks for the article Rob. I did think Labour's response was a bit tepid. The whole "let's wait for the OECD to sort it out" is, frankly, nuts.

    I don't know about the oil sector. The pharma sector drives me nuts (see also TPP and IP and monopolies). Yay we beat up on the banks and they now pay fair taxes. I *do* know a lot about the digital / IT sector.

    Matt Nippart and John Campbell have done a great job. But they are reporting on company returns available in NZ. The figures they quote are still massively understating the issue and the anti-competitive situation local (anywhere in the world) businesses face.

    The vast majority of NZ $s going to Microsoft, Google, Amazon and all are simply not reported in NZ. When any ministry pays for Google Apps the money doesn't touch the sides. It goes straight overseas. Same for all sites that use Google Analytics, Ad words and so on. Ditto for AWS (by the way, you *do* know our health data is being shipped to AWS, right?). Between them both companies employ less than 2 handfuls of people here.

    The point is not whether NZ should use these products and businesses but how to value and reflect the economic impact of that use. The government, which controls over 30% of our GDP, is in the box seat to make this evaluation whenever the make a purchase.

    So, if we want to see behavioural change, across the business community, we need to ask our own government to look seriously at the economic impact of how they spend.

    As David Farrar and others on other blogs were always very fond of saying..."it's our money".

    Wellington • Since Nov 2006 • 1645 posts Report Reply

  • Heather McCracken,

    I can buy the same 13 inch Macbook Pro (2.6GHZ, 128GB HDD, 8GB RAM) from Apple for $2,399 and from JB HiFi for exactly the same price.

    There's also the substantial markup on US prices. I can buy that same Mac in the US for $1299. On a straight currency conversion that's NZ$1900. Is an extra $500 per unit justified to get the product to NZ?

    New Zealand • Since Oct 2013 • 1 posts Report Reply

  • Alfie,

    An inquiry into multinationals taking the piss out of the IRD and ripping off NZ taxpayers? Revenue Minister Michael Woodhouse says nah!

    Dunedin • Since May 2014 • 1377 posts Report Reply

  • Alfie,

    Dunedin • Since May 2014 • 1377 posts Report Reply

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