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Google NZ posts another loss - and makes another tiny NZ tax contribution

In a now familiar ritual, Google New Zealand has posted another loss, all but avoiding a local tax contribution.

Records just filed with the Companies Office show Google New Zealand lost $52,000 during its 2011 fiscal year - worse than the $45,000 loss it reported for 2010.

Revenue increased to $4.45 million from $3.98m in 2010.

Income tax expense is listed as $109,000, down from 2010's $203,000.

Other expenses that helped push the company into the red were led by marketing expenses of $3.03m, up on 2010's $2.60m.

So is Google New Zealand a basket case? 

Far from it.

The latest IAB/PwC figures show NZ online advertising spending in rude health - particularly the search and directory category where spending in the last quarter alone was $29.77 million.

Many surveys put Google's search engine share at around 90% in New Zealand.

And with Yellow forced to buy search words en masse to stay relevant (the company is said to be Google's largest NZ customer), the search giant is doing very well out of the directory market, too.

It's more a case that, like a number of multi-national technology companies, Google bills advertisements booked by New Zealanders to its operation in the tax haven of Ireland.

Analysts have estimated that Google's Australia-New Zealand operation, based in Sydney, clocked up around $A1.1 billion in revenue during 2011.

But booking search ads through Google Ireland has dramatically limited the US-based company's local tax liability.

For 2011, Google paid just $A74,176 tax across the Tasman.

And, as every year since the mid-2000s, it led to political outrage. 

This time, it's been opposition ICT spokesman Malcolm Turnbull whose accused Google, and companies like it, of eroding Australia's tax base.

The conservative politician said a coaltion government would seek to make companies like Google and Facebook pay more local tax.

Google spokesman Johnny Luu told NBR ONLINE his company had no comment on Mr Turnbull's claims.

In a separate statement, Google said it complies with the tax laws of every country in which it operates.

ICT Minister Amy Adams referred questions about Google NZ's tiny tax contribution to Finance Minister Bill English's office.

NBR has sought comment from Mr English, and Revenue Minister Peter Dunne.

Internationally, the heat is being turned up on tech companies.

Amazon is under investigation by British tax authorities for recording about £8 billion in revenue in Britain over three years without paying tax, according to a Guardian report.

And the New York Times has accused Apple of dodging billions in US taxes by billing from Nevada (where the company has no operations), routing routing profits through Irish subsidiaries and the Netherlands and then to the Caribbean to pay an effective tax rate of 9.8%.

More by Chris Keall

Comments and questions
10

Hypocrisy - I wonder for how long the IRD would let me get away with setting up a company and channelling my PAYE income via Ireland??

You can buy all your goods from Amazon UK (which I think is based in Irreland) and legal avoid paying NZ GST.

And if you decided to do your job from abroad (can you work remotely via computer?), then you could get away with no PAYE either.

Tax rules haven't caught up with the internet age.

It's not PAYE tax that's the issue, it's corporate tax. Companies don't pay PAYE tax, individuals do.
Any company charging New Zealanders and NZ companies online can at present bill that revenue anywhere in the world - so they place it in a low-tax environment.
Dropping our tax rate isn't the solution, monitoring bank's processing of online transactions overseas is.

A Statist said:

"Dropping our tax rate isn't the solution, monitoring bank's processing of online transactions overseas is."

Hey, why don't we get the State to mandatorily install one of those two-way view screens in every room in the land, just like in Orwell's 1984?

If NZ had a low tax environment, rather than an extortionate one, they'd want to be taxed here.

Whos the chairman of NZ Post?

Crooks!!!!!

Bring in a flat tax of %20 and dump GST.

The issue here is Google is claiming they aren't providing a service in NZ because their servers are based overseas. But ...

The advertiser is a NZ based company and they sign up for the advertising while sitting at their desk in NZ
The consumer is a NZ based person looking at ads as they search google from their desk in NZ.

HOw is that not a service provided in NZ? It would be different if it was overseas advertisers (say BMW Germany) or a NZ company targeting overseas (ie F&P targeting australians).

Tax rules haven't caught up to online businesses.

Google NZ is not providing any of these services. All it does is seeks out advertisers for another company (the Irish one) and receives a service fee for doing that. That only needs to derive a very small margin over cost. None of the advertising spend is going through the NZ company.

The US govts premise for extraditing Dotcom is although he/his business wasn't physically in the US it was "effectively doing business" in the US (read the indictment) which gave US courts jurisdiction over him as an otherwise foreign national.

Point being, here Google is for all intents and purposes doing business in NZ just the same as Dotcom was in the US. Google directs NZ advertising at NZ web viewers and receives $ from NZ companies so for all intents and purposes it is "doing business" in NZ knowing they are New Zealanders.

Thus, NZ has every legal reason to file a US court order against Google US for not collecting GST as required in NZ law.

I dont see a problem with US companies that have lots of paying NZ customers having to collect NZ GST as they would if located here.