Government Favours Global Tech Giants In No-tax Deals

PAT PILCHER is angry about international tech companies who get away with paying virtually no tax in New Zealand, and are wierdly given preferential treatment by our government.

 

Sometimes I’ll read something that leaves me so incensed that I’m literally lost for words.

According to a story on Stuff, a back-room deal has been inked between a foreign lobby group and our government to ensure a favourable tax position for the NZ operations of several US based tech multinationals who the lobby group represents.

According to the UK’s Guardian, the lobby group is called Digital Economy Group, and it was originally formed by Silicon Valley companies to disrupt plans agreed upon by G20 member nations to shut down tax loopholes being exploited by multinationals.

These tax loopholes have been long known about and are frequently used in New Zealand. In March, the NZ Herald reported that Apple’s New Zealand operations had paid no income tax for the last 10 years, even though they’ve sold untold millions of dollars of iPhones, Macs and iPads into the New Zealand market. Apple are not the only multinational taking advantage of these tax loopholes.

The most commonly used method is called transfer pricing. Under this, foreign corporates will pay a subsidiary (or other agents) fee to market their products and services in another country. Sales and revenues are booked overseas and the fees charged by the head office cancels out most of the revenue generated by the subsidiary, meaning that they are unprofitable on the books, and therefore pay hardly any tax.

This is so wrong on so many levels that I lose count.

The very foundation of this is the fact that a democracy works because people are taxed to pay for education, and so that they have access to health services and public infrastructure (roads, rail, police).

That the corporates represented by this lobby group think they should be allowed to exploit tax loopholes to pay virtually no tax for their New Zealand operations, even though they’re making full use of tax payer-funded resources to do business, is both short sighted and boggling.

Worse still, it is unsustainable. Put simply, if all multinational subsidiaries stop paying taxes, there won’t be enough money for New Zealand to function as a safe, enlightened democracy. But then that’s probably okay as we will all still be able to access Facebook, buy cheap iPhones and so on…

This also sets an ugly precedent for other offshore companies operating in New Zealand. If this group can secure a deal for their members, why can’t similar deals happen for other multinationals? Once again, taken to its logical extreme, the number of tax-paying corporations could in theory become so low that there is no money to fund schools, hospitals and other vital government services that give us a decent standard of living.

It also raises the sticky issue of why the government is showing favouritism to these offshore businesses when Kiwi companies will never receive similar preferential treatment? Surely a government elected by New Zealanders should be putting the needs of New Zealand businesses first. Clearly, that isn’t happening. If I was a Kiwi business owner, I’d be pretty pissed off.

Throwing salt into the wound, most of these offshore businesses don’t employ many, if any Kiwis, making their contribution to New Zealand’s economy negligible. Their presence in New Zealand often consists of little more than a warehouse, or a small retainer paid to a local PR firm. Often, their marketing and anything else of any real value is handled out of Australia. This is because their ill-informed offshore owners see New Zealand as a state of Australia. So, while they’re shifting millions of dollars out of NZ’s economy using our taxpayer educated employees, roads and so forth, they for some reason don’t feel the need to pay tax like the rest of us. See why I’m furious?

 

 

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