Apple’s NZ unit pays 0.4% tax on 2012 sales of $500m
Apple Sales New Zealand, the local unit of the iPad and iPod maker, posted a 38 percent jump in full-year sales to $571 million, though the tax department received a payment amounting to just 0.4 percent of that.
Apple's New Zealand sales topped the half-billion dollar mark in 2012 after rising to $414 million in 2011, according to its financial results for the 12 months ended September 29.
The local unit of the world's biggest tech company recorded a tax-paid profit of $5.5 million in the year, down 40 percent from its 2011 earnings. Income tax fell to $2.5 million, amounting to 31 percent of pre-tax earnings, from $5.1 million a year earlier.
Multinationals like Apple, Facebook, Starbucks and Google have come in for criticism for structuring their global businesses to minimise tax payments.
The New York Times last year named Apple as the inventor of the "Double Irish With a Dutch Sandwich", a term coined to describe a practise of reducing taxes by routing profits through Irish subsidiaries, then the Netherlands and finally Caribbean tax havens.
While the structures are technically legal, the huge reduction in tax owed prompted the Organisation for Economic Co-operation and Development to call for a worldwide crackdown on that kind of behaviour. It released a report into tax avoidance in February urging countries to work together to beat tax avoidance.
Revenue Minister Peter Dunne said last month that New Zealand will strongly align with OECD measures in tackling the issue of fairly taxing multinationals.
The Inland Revenue Department and Treasury released a report on taxation and multinationals in December.
"On a general level, companies like Apple are the kinds of companies the IRD and the OECD are thinking of with these reports," says Geof Nightingale, a partner at PwC in New Zealand. Taxation for multinationals has become very complicated, he added.
Apple NZ's 2012 accounts show the vast bulk of revenue went back to other parties in the Apple group to pay for inventory. Purchases of products from within the group amounted to $551.7 million last year, amounting to 97 percent of the local unit's sales.
Apple's Australian spokeswoman Fiona Martin says the company does not comment on its operating performance.
(Businessdesk)
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Comments and questions18
When will they grow a pair and start getting these multinationals?
They have an unfair (30%) advantage over domestic players, they don't vote and, oh wait, they are big donors to both political parties.
What a spurious article. No business taxpayer pays tax on total sales; tax is calculated on net profit. This piece going for sensationalism by calculating tax as percentage of sales, is false and shoddy.
During its most recently reported quarter (to December 31, 2012) Apple reported a record global net profit of $US13.5 billion on record revenue of $US54 billion.
Given that level high level of profitability, the breakeven NZ unit result is noteable.
If it breaks even there is no tax. Turnover is irrelevant.
Mark, please tell us how you can define Apple's profit in this instance? You can't! Their grubby little tax accountants have manipulated their prices to their gain, and NZers loss. Actually little is a bad term, they'd have dozen of tax accountants in house.
We know their operating margins is >30%. But by the power of transfer pricing Apple is saying they sell their hardware products into the NZ market at like something like a 5-10% mark-up on the 'cost price' (but really, the transfer price, the amount they pay whatever shelter trading company they have operating in whatever tax haven). Not to mention undoubtedly the 'management fees' they would be hitting the NZ company with.
So no, the article is not spurious. The only spurious thing is Apple (and other companies) 'net profit' in NZ.
Who increased our standard of living: government, or the innovation of Apple, Amazon, et al? Easy: private enterprise.
http://lifebehindtheirondrape.blogspot.co.nz/2012/11/amazon-is-our-hero-not-villian-in-piece.html
Hi Bob - I would like to address your comment on transfer pricing.
Consistent with the vast majority of countries, New Zealand's tax legislation requires arm's length pricing for related party transactions. If Apple's related party transactions are priced at arm's length then a fair amount of profit and tax will be left in New Zealand based on the business operations it has in NZ.
I know very little about Apple's business model, but I would assume that a large part of its profitability is due to the intellectual property in its products. It therefore makes sense that the entity that creates/owns that intellectual property should take the majority of the profits in the group (and conversely incur the bulk of the losses if a product does not do well). I would imagine that the New Zealand operation is little more than a distributor - a box-mover with limited value-adding functions. If so, it should earn no more than a routine level of profit.
There has been a global backlash against "unjust" transfer pricing practices in recent months. I would suggest that a large part of the problem is insufficient activity by the tax authorities. Here in the UK everyone is boycotting Starbucks because they don't pay enough tax, but nobody seems to be asking why HMRC has not noticed that Starbucks has been making a loss for so many years, or if they have noticed why they haven't thought to make some inquiries into their transfer pricing practices.
Clearly if Apple has managed to get away with non-arm's length pricing then something has gone wrong - and we should be asking the IRD why they haven't noticed. But we cannot assume that simply because Apple New Zealand doesn't earn huge profits that they are immediately guilty of inappropraite profit-shifting. We would need to understand what the NZ operation actually does vis-a-vis their offshore counterparts, and which entity in the supply chain is performing the key value-adding functions.
Watching? 5 years of watching isn't really watching is it. It's more like sitting.
If large corporations where taxed properly we could lower then tax rate in every bracket by many % points and still generate more tax revenue than we currently are... SMEs cant get away with this why can massive global corporations ?
The answer is clear. TAX COMPETITION. Lower tax rates to compete with Ireland and other tax havens and you'll get more tax revenue
I think at least on person who "liked" your comment missed the irony. Too subtle, I am afraid. Iisn't Ireland doing well now!!
I hope you were being ironic, not ignorant.... Any thoughts Rodney.
Fletcher Building has sales of $8.9B and only had a tax expense of $53m and only paid tax to IRD of $33m (all figures from last annual accounts).
Cue outrage!
Shock, horror. Fletcher Building only coughing up 0.37% tax, less than Apple (and let's not even go to NZ market darling Xero's 0% - as in nil, zilch, 'z'ero).
Having said that, Apples profits are too low. As a limited risk distributor, I would expect a NPBT of 3-5% which would result in tax of 1-2% of turnover.
So they should be paying 2-4 times as much - about the same as the carpark tax would have caught. Dunne - off you go, chase them, that move will be popular!
Everyone who commented on this post stating that they should pay more tax obviously don't know how the tax system works. If a company has revenue of $10m and their net expenses is $9.9m they will only pay tax on $0.1m (profits).
Doesn't matter where you are. For example, Apple US could charge Apple NZ and inflated raw cost for their products. At the end of the day they will be caught paying tax in whichever country they make an actual profit.
Unless that country where they make an actual profit is a tax haven, which low and behold Steveo, it is!
However, not quite as simple as you make out. Transfer pricing rules stop companies from charging inflated prices to related parties. Unfortuately, those rules are very difficult to enforce.
So what if it's a tax haven? The only reason it's a haven is because people from other countries who pay higher tax are jealous. It's the way of the world and you can't stop globalisation.
No. It is a tax haven because they take a very small cut of a large number on the basis that something is better than nothing.
No economic gain is derived there (sales, R&D, manufacturing, management) so why should that country get any benefit?
If tax havens didn't exist, governments in non-tax havens would be able to reduce tax rates and still derive the same amount of tax revenue.