Google NZ paid next to no tax for 2017

Google NZ senior manager, public policy and government affairs Ross Young promises a shift in business model.

Google has released accounts showing its New Zealand operation paid $392,916 in tax last year on revenue of $13.81m (2016: $12.59m).

Figures collected by PwC for the Interactive Advertising Bureau (IAB) indicate Google's total revenue from New Zealand runs into the hundreds of millions (more on which below).

However, most of that was invoiced to Google subsidiaries in lower-tax Ireland or Singapore.

Google reported a $1.0m loss for its New Zealand operation.

In 2016, it reported a $604,000 loss on revenue of $12.6m revenue and tax expenses of $305,000.

Google and Facebook have both recently promised to book more New Zealand revenue in New Zealand.

In Google's case, it will do so from January 2019. The company has not detailed exactly what categories of revenue it will book locally, and declined detailed comment on that front today.

Both companies are, in part, reacting to the way the wind is blowing. Revenue Minister Start Nash has legislation going through Parliament designed to crack down on profit and revenue sharing by multinationals. (A similar, recent change across the Tasman saw Google's reported local revenue suddenly soar to $A3b).

In a parallel move, IRD is auditing 16 multinational firms for alleged tax avoidance. The agency has refused to name the firms, and so far only two have voluntarily named themselves: Oracle and Microsoft (which recently transferred ownership of its New Zealand operation to Bermuda).

Online ad figures point to Google revenue
IAB figures just released for the first quarter show search ads (essentially, Google) accounted for 62% of the largest online advertising category, display ads. That's up from 58% in the first quarter of last year in a growing market.

For the whole of 2017, search ads also dominated, according to IAB figures, which imply Google booked something in the region of $342m from the New Zealand market (see chart below). Google Reseller would have clipped the ticket, but Google's actual revenue would still have been quantumly above its reported $13.81m. And would have included revenue from the pro versions of Google's business software, and Google Play, as well as ads.

Earlier, Google NZ senior manager, public policy and government affairs Ross Young said Google only has about 30 staff in New Zealand. Most product development is done in the US.


Source: IAB. Click to zoom.


Click to zoom. Industry statistics released today show the total online ad market growing from $209.4m in the first quarter of 2017 to $244m in the first quarter of this year. Search (read: Google) increased its share of display ads (easily the largest spending category) from 58% in the first quarter last year to 62%. Display grew from $121m to $151m. Source: IAB. 


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26 Comments & Questions

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If NZ had the same low tax rates like every other progressive and prosperous countries there would not be an issue.

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Very true, this outcome has been warmed by anyone with a decent understand of economics. Want higher tax? Sure, people will vote with their feet. Same goes for personal income tax too. People have no right to complain about it if they wished for high taxes.

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So a race to the bottom for what country can charge the lowest tax rates because that benefits who exactly? And whats the bet the likes of Facebook & Google will still hide away revenue in Ireland & Luxembourg & still not pay tax

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Someone in these comments that finally understands one major issue with Capitalism. You can't control the the desire for profit..

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In fairness, Labour has by virtue of reinstating the R&D tax credit given many NZ companies a tax cut.

That said, we should follow the advice of folk such as Milton Friedman and cut company and personal tax rates and apply a flat land value tax to pick up the shortfall. Push money out of speculation on property and into business.

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Disgusting. Google making a loss in NZ is simply not credible. An egregious failure of the sniff test. They could have at least deflected attention by paying a few token tens of million in tax. Welcoming a change in attitude is weak. We should demand back payment and penalties.

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And no gst charged either, so they contribute nothing to nz. They need to be held to account otherwise other advertisers shouldnt have to pay tax or gst either.

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Hi Robert

Don't you use Google? Their contribution to NZ is enormous. Govt would fall over without Google. They don't pay much tax but why should they?

Rodney

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Hi Rodney,
The issue is about fairness. Plenty of other business contribute to NZ - and pay taxes - whether they like it or not. If Google chooses to compete in the NZ marketplace (and it is a choice) then they should be reporting real profits generated in NZ and not siphon it off to other jurisdictions with ultra low corporate tax rates.

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Fairness is subjective. I think google's contribution towards the human race is enough to grant them tax exemption. Stop trying to take other people's money.

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There have been complaints from NZ Rise and others that local IT companies are not on a level playing field when they compete for private or public-sector contracts, because Google, Microsoft et al have lower expenses due to their profit and revenue-shifting (though I guess your response to that might be that the likes of Datacom and Catalyst IT should fight fire with fire and set up subsidiaries in Ireland or similar).

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I use DuckDuckGo - because they don't track me, don't profit from collecting and monetising my data, and don't serve me results based on where I've been or what I've searched before or what Google can make more money out of by putting at the top of search results.

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Thanks Martin. I like the idea of not having same adverts pop up in my face because they're tracking me. That really irks me. I've just changed so we'll see how it goes. What's their business model do you know? If not tracking it won't be as 'effective' as Google.

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As someone who is self employed, I would love to relocate my business overseas to pay less tax. But the IRD would be unlikely to let me do so. As my revenue would still be generated in NZ. Forcing multinationals to pay their fair share would easily fund some cuts to the corporate tax rate, and help level the playing field for local companies.

How do you define "enormous contribution" in regards to a company not needing to pay tax? And why would the NZ government fall over if Google disappeared? As every service that is offered by Google is also available from other companies.

Anyway, Google search results are not as good as they previously were, especially for specialist and technical information.

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To nz tax take they have contributed nothing. It is blatant tax avoidance. If we advertise on tv, the newspaper, billboards, radio we pay the supplier and those organisations charge gst and pay tax on profits. Google doesn't and that isnt reasonable. The high speed fibre investment the govt has made hasnt had a cent come from the likes of google or facebook yet they benefit from it.

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That's a really lame argument Rodney. The same could be claimed about many companies and individuals, but it doesn't excuse Google's manipulation of revenue and expenditure to avoid paying tax in NZ.

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The obvious solution is to lower taxes in NZ too. If you don't support that then you have no right to complain about it really because this type of out comes are inevitable.

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Your actually right, when people complain companies and individual don't pay taxes so they're not contributing so totally incorrect. As long you are a business that have customers, or a person that is working, then for all intents and purposes you are contributing. It's out right greedy that when Google has contributed so much towards the human race yet you still want to take more money from them.

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If you have a tax system that allows you to get away without having to pay much tax, then there's going to be those that are going to exploit it.
Answer, change the tax system so they can't do it in the first place. Or is that too simple?

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Since when has 'contribution to the human race' been a tax deductible?

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Damn straight. And Google is not Mother Teresa's avatar ... it's a corporate money-maker. The save the world spin is just old fashioned marketing & PR.

Coke adds life ... um ... Google ads ... um

Pay your taxes ... we paid ours ... early!

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Simple. it is a tax deductible expense for the companies availing themselves of this service, so the government should be able to calculate how much google is paid if they dig deep enough. it looks like there is value in digging .....
then the question should be where is the service consumed. the customers paying for it are the consumers of the service, so follow other domiciles and amend tax rules to capture this revenue.
let's not conflate the debate with arguments on tax rates being too high. They are, but that is a different argument compared to finding holes and taking advantage of a tax system designed before the age of virtual businesses and the internet.

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The 2017 story of what Google says it contributed to business, consumers and society is available here:
http://www.alphabeta.com/wp-content/uploads/2017/05/Google-Economic-and-...

Google has also collaborated with various groups to prepare the following report which argues for broad exceptions to IP rights in New Zealand. The question we should be asking about this is "who seeks to benefit"? It is unlikely that the answer is kiwi's or New Zealand.

https://www2.deloitte.com/nz/copyright-digital-age

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What services Google contributed to the country is irrelevant to how much tax it should pay. Slick PR, but poor logic.

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Our NZ Political parties and IRD - do not have the knowledge or know-how to tax new industries in the coming economy.
Everyone needs to contribute to the tax system - so that NZ has the best social services and infrastructure...
Lets figure out how to up-skill the thickies in charge of these things so we can all benefit from the new industries and economies...

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We should lower out taxes to compete with tax havens? We should let them off taxes since we like their product?! Maybe we should just update our tax law for the internet age and stop companies putting through bogus accounting charges from offshore to avoid paying a fair amount of tax like every other company out there. Am I missing something!?

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