Google NZ paid next to no tax for 2017

New ad industry figures indicate the search ad giant is booking only a fraction of its NZ revenue in NZ. It has pledged to change, but details are fuzzy.
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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