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Google pays $227,074 of tax in New Zealand

Google Inc is paying more tax in New Zealand than previously but its $227,074 tax bill in 2013 isn’t likely to stress a company with US$15.42 billion of revenue globally in the quarter ended March 31, 2014.

The Labour Party has been pushing the issue of the tiny amount of tax being collected from multi-national companies, targeting Facebook in particular. Revenue spokesman David Clark has argued the government should have the power to ban websites if multi-nationals making money from them don’t pay much tax locally.

Google’s global accounts show a 19 per cent increase in revenue in the first quarter compared to the first quarter of 2013.

The accounts for Google New Zealand for the year to December 31, 2013 filed to the Companies Office show revenues of $10.13 million, up 49 per cent from the $6.8 million in 2012. That's more than twice the 21 percent increase in total online advertising across New Zealand last year to $471 million, according to Advertising Standards Authority figures.

Search was easily the single largest category in that $471 million online ad spend, and Google holds an estimated 90% of the search market. However, like Facebook and others, it bills much of its bookings from NZ and other countries to its subsidiary in Ireland to take advantage of the country's lower corporate tax rate.

The bulk of the revenue is from the provision of services, with $1,919 of interest income, and is unlikely to reflect the ultimate parent Google's advertising sales in New Zealand.

The income tax expense of $227,074 for 2013 is up from $165,526 the previous year and it reduced pre-tax income of $166,685 to a loss of $60,389 for the year.

Accountants have said international tax treaties are not coping with global digital businesses.

The Google New Zealand accounts have $2.3 million of service fees to the parent and $7.8 million of fees to other related parties.

The breakdown of expenses shows employee expenses of $3.9 million, down from $4.2 million last year and advertising and promotional expenses of $1.3 million, up massively from $253,449 last year.

(BusinessDesk)

Comments and questions
11

They actually paid $230k which can be seen in note 7.

Pot calling kettle black - how much do you think Fonterra etc pays in other countries............

Interesting. So you're saying Fonterra also funnels revenue through Ireland which is then moved onto Netherlands to avoid having to pay taxes??

The funny thing about Apple, Facebook, Google, Microsoft doing this is that this money is stuck and not repatriated back to the US.

So if Fonterra is doing this too, where does the money come from to pay the farmers??

I think the tech companies have taken tax avoidance to an entire new level. Companies selling physical goods are not in the same position to take advantage of those loopholes.

Ohhhh hit a nerve? I dont believe in Santa so bet they do. Have a look at all subsidiaries names deep in back of annual reports

Didnt realise there was a half pregnant in tax planning - black + white

Google, Facebook, Amazon, etc all play this game because they are allowed to.

They don't repatriate the cash back into the US as it would be taxed.

Over the last year the UK have probed Google, Starbucks and Amazon's tax structures and they'll give you the same reply, that being "We are paying the tax we are legally obligated to".

The reason tech companies are able to do this is because they hold their patents in the offshore subs and pay royalties to them to use this IP.

Microsoft has gone on the record stating the same, if you want these companies to pay their fair share of tax then change the law? But nah, think about how much money these companies contribute towards the economy in terms of jobs (In large countries anyway), government gets the tax $.

Boeing do the same btw which is ironic considering the CEO of Boeing is the head of the US Presidents Export Committee, then again it's all about jobs and Boeing is a major US employer.

Obama went after wealthy individuals (wrt to Credit Suisse and UBS) as it did not affect domestic jobs. It's the USA, corporate capitalism rules......

Instead of focusing on the Facebooks and Googles operating in NZ perhaphs we should address the tax schemes fund managers/private equity firms in NZ are using (ref carried interest and company locations).

e.g
http://www.business.govt.nz/companies/app/service/services/documents/E843D88AB0FC5DBFF74FDD7173C9CC72

It would be interesting to see what the IB's are making in NZ and how much tax they pay, they hold significant client funds and are integral to market liquidity, I wish they were legislated to disclose their financials!

Less focus on things as NZ cannot change - the googles and facebooks, more focus on what we can - the financial and property sector in NZ!

Approx $450 million in revenue and essentially no tax paid.

That's not even close to fair. So change the law.

Who ever said the tax system is designed to be fair?, it's a fiscal policy tool at the end of the day, direct/indirect taxation is rife in this country, and it's also to line the pockets of the cartel which is the professional accounting industry in NZ.

In the defence of these companies they provide something more important than pure tax dollars, they provide jobs up and down the supply chain and PAYE tax revenue for the government, unfortunately it's for the US government, good luck trying to get them to change the laws. (MSFT have a large presence here and they do contribute significantly to the local scene here but GOOG only have 3 people in their nz office).

GOOG also (AFAIK) do not pay GST on Adword sales in NZ, this part seems a bit odd to me as if someone in NZ views an ad that was paid for by a NZ company, then service delivery has happened in NZ, presumably the NZ company would be seeking a GST credit for that ad purchase, why does google not pay the gst?..... (10m of revenues with 90k tax payable on balance date 0.9%).

And even if NZ changed our local laws they will be over ridden by international treaties, the US know how to play the game.... Look out for TPP , no such thing as a free lunch ;)

Again, refer to Boeing's tax structure, there's no way it's going to change, too much at stake for the US.

Considering google content is hosted in NZ and not in Ireland the revenue from sales should be returned back to New Zealand. Do a simple IP address trace on google and check which country it is registered and hosted in .... It's not Ireland. I guess under international data law are there a few laws being broken here !

It doesn't matter where it's hosted or where money comes from or changes hands etc because the technology used to provide that service is licensed to it's Irish subsidiary.

Google then pays the Irish subsidiary a royalty fee, which leaves very little profit in the country google operates (eg NZ), thus minimising on their NZ tax.

Time for a financial transaction tax; same percentage for everyone!! Easy to administer, and everyone pays their fair share.

The EU are working on this as we speak. The big banking nations are the only ones holding this up. What has NZ got to lose by leading the charge? Nothing but more taxes being collected from those who should otherwise be paying.

GST is no longer working, with the growing level of online trading, and its hardly user pays when financial transactions are excluded.

What better way to simplify the tax system than a financial transaction tax. It has the potential to do away with all other taxes!!! The NZ government needs around $80 billion to fund the country services. Just impose a consistent tax percentage on all receipts and payments, and we will have the most efficient performing country in no time.

So many of our international policies can be reduced to one word... trade.

Leading the charge internationally on a financial transaction tax doesn't fit.

It's good populist stuff for people who don't think they will ever pay it, but no good for a trade orientated capital starved little nation at the bottom of the world.

By all means put our efforts into international reform so that the global picture changes.