Facebook, Google not cheating on tax - expert
Friday 30 Nov 2012 9:48 a.m.
Tax treaties are built around "bricks and mortar" companies, not the internet
Facebook and Google aren't cheating the system by paying tiny tax bills, an international tax expert says.
Labour is blaming the government for allowing the companies to "get away with it" after producing figures showing Facebook's New Zealand arm paid $14,500 tax on revenue of $427,967 last year and Google $109,038 on revenue of $4.4 million.
The party's revenue spokesman, David Clark, says Revenue Minister Peter Dunne is refusing to close loopholes but international tax expert Maurits van den Berg says it's not that simple.
"The future has arrived, we're dealing with intellectual property and it's very mobile," he said on Friday.
"These big multinational intellectual property companies quite likely have minimal or no actual presence in New Zealand - it makes them quite hard to tax."
Mr van den Berg says Facebook and Google aren't guilty of tax evasion, or even tax avoidance.
The problem is that international tax treaties are built around "bricks and mortar" companies which have property and employees in different countries, he said on Radio New Zealand.
"It's easy to tax a multinational company that has a warehouse in New Zealand and employs sales staff but these intellectual property companies are a real challenge for governments."
Mr van den Berg agrees with Mr Dunne, who says New Zealand has to operate under its international tax agreements.
"Intellectual property needs to be sorted out at an international level, and it's going to take years," Mr van den Berg said.