Labour’s fighting words about chasing corporate tax avoiders might win some headlines, but it won’t win votes and it will struggle to deliver more tax from those companies most in the gun: multinationals.
Labour finance spokesman David Parker is right to complain about lost tax revenues from global companies using clever accounting practices to reduce their income. The usual suspects are the darlings of the Internet, Facebook, Google and Apple, which have pioneered clever money-go-rounds by placing their ‘headquarters’ in jurisdictions with lower tax regimes, such as Ireland and the Cayman Islands.
In New Zealand Google paid $227,000 on just $10 million of revenues. Facebook recorded a loss of $83,000 in 2013. Yet the Internet Advertising Bureau reports that more than $400 million was spent on internet advertising in 2013, the lion’s share of which was the likes of paid search, Google Adwords, sponsored posts and advertising on social media.
It beggars belief that these operations make such little money in New Zealand.
Source: FT.com
However their declarations are legal. As they are worldwide. Last year Apple, despite a grilling by US legislators, was exonerated by the Securities and Exchange Commission. Libertarian senator Rand Paul went so far as to congratulate Apple on its tax avoidance and berate the US government as ‘bullying and badgering’.
Most people regard paying taxes as compulsory but apparently not if your a large corporation or a right wing politician.
Anger in the EU has promoted legislators to tighten loopholes – but this debate has been going on for over three years now and little progress seems to be made.
And it’s getting worse not better. The latest twist on the theme is ‘inversion’ – a policy to merge with a company in a lower-tax regime and shift the HQ there. One estimate puts the cost at $17 billion to the US.
Labour’s announcement that it will recoup $200 million from multinational tax avoiders is fanciful. At one point Parker even threatened to ban Facebook, which would be about as politically popular as shutting down Coronation Street. New Zealand has no real tax levers to pull, apart from naming and shaming. And look at where that got Shane Jones.
This is a global problem and needs a global solution.
Or a regional one. If Parker could facilitate an APEC or Australasian approach he might just get the hearing he wants.
Meanwhile, someone somewhere in California is getting incredibly rich at New Zealand’s expense.
