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Govt considers tightening tax laws

Friday 30 Nov 2012 6:01 p.m.

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The Government's considering whether New Zealand needs to toughen its tax laws amid claims companies like Google and Facebook are taking advantage.

A tax expert who's looked into Google's books says these companies may be rorting the system, but that doesn't mean they're breaking the law.

When New Zealanders advertise to other New Zealanders on Facebook they pay New Zealand dollars but it goes into an Irish account.

“The way Facebook sets up its accounts means it's minimising its revenue flows through New Zealand and that means it pays less tax in NZ, and I don't think that's fair,” says Labour MP David Clark.

The Government's ordered an urgent report into claims against companies like Facebook and Google to see if the laws here need to tightened.

“The question is whether it's legal - we wouldn't let them get away with it if we can stop it, the question is can we stop it?” says Prime Minister John Key.

After tax, Facebook NZ lost $81,000 last year while Google NZ lost $52,000. Compare that to Microsoft, which is worth roughly the same as Google - its profit was $5 million in the year to June.

“They may be completely compliant with New Zealand law that doesn't mean that what they're doing is morally correct and there may be a fairer way for the New Zealand Government to collect their money,” says chartered accountant John Rowe.

But in a statement Google told 3 News the reason its revenue is so low is because it provides services to millions of Kiwis for free.

And Facebook's the same, saying it complies with all New Zealand laws and also makes a significant contribution by providing free services.

So it's come down to a question of what's legal and what's right.

The IRD says it's tricky because these companies have such a limited physical presence here, but New Zealand is likely to follow if there's a global crackdown.

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