This op-ed was originally published in the New Zealand Herald.
On May 14 Australia’s Budget will introduce new requirements providing more transparency of tax arrangements by giant multinationals like Apple and Google. It’s a fair bet that just two days later, our Government’s Budget won’t.
Australia has chosen to front-foot an important global economic challenge while, once again, our Government sits on the sidelines.
The new Australian regulations will ensure companies with annual revenue above A$100 million ($122.5 million) will have their tax details published by the Government in a bid to ensure that all pay, and are seen to pay, their fair share.
The issue is sharpest for online sales, where it is possible to allocate costs and shift profits and tax liabilities across borders to low tax jurisdictions.
“As a matter of principle, taxpayers, whether they’re companies or individuals, should pay their proper rate of tax.” Most fair-minded Kiwis would agree with that statement by Australian Prime Minister Julia Gillard.
On April 2 the Herald’s editorial railed that “point-scoring outbursts will not solve [this] tax conundrum”.
I couldn’t agree more. Reasoned and considered debate on this complex issue is required. But that must not be an excuse for inaction. This is not a populist issue – it is an issue for a 21st century tax system and one that multiple jurisdictions and international bodies are grappling with, including the OECD and the Group of 20 industrialised nations.
Enduring solutions will require both a global response and a clear sense of what we expect of our tax system in New Zealand. But global co-operation is no excuse for local indifference, impotence or resignation.
Recent months have shown that we have a Revenue Minister who is more interested in tinkering around the edges.
Peter Dunne wants to tax New Zealanders’ use of iPads and iPhones but shies away from taxing Apple itself.
The Herald asked this writer if it seemed fair that in New Zealand Apple paid only $2.5 million in tax on $571 million in turnover. Of course tax is paid on profit, not revenue – and Apple NZ apparently made only $5.5 million in profit and paid 31 per cent tax on that. Fair enough?
Oddly, Apple shares have climbed 73 per cent from US$404.30 to $700.09 ($471,00 to 815.85) over the tax year to September 2012. Its global profits climbed from US$25.922 billion to $41.733 billion, or from 23.94 per cent to 26.66 per cent of sales revenue during that time. So why was its New Zealand arm so apparently unprofitable at less than 1 per cent of sales revenue, relative to Apple’s global operations?
New Zealand Inc’s inability to answer that question is exactly why the Australian Government will soon move to require transparency of tax arrangements for large firms. I would hope that as good corporate citizens New Zealand-based multinationals would welcome similar transparency here.
Let me put on record that Labour is not proposing new taxes in this area – we are researching and consulting on a widely recognised challenge: how to protect the tax base, improve transparency and reduce legal avoidance of existing tax obligations by global companies operating within New Zealand.
Globalisation is a fact, not a philosophy. The issue for all New Zealanders is how we deal with it.
Do we lay ourselves blindly open to the chill winds of international markets and simply take the tax affairs of multinationals on trust? Do we say it’s all too hard and bury our little heads in the Antipodean sand like the current Revenue Minister? Or do we learn to play a high-value global game like winners – including insisting that global businesses operating in New Zealand transparently pay a fair and equitable share of tax?
The answer matters because if multinationals avoid paying the taxes that are due, Kiwi mums and dads will be forced to pay more for their early childhood education, school “donations” and higher fees for taking their kids to the doctor. Or we will be told the services we need are no longer available because we, as a country, can’t afford them any more.
We are increasingly paying a high price for growing inequality. We have a right-wing Government moving to “targeted” social funding because even it is not blind to the inexcusable, ghastly truth that 270,000 Kiwi children live in poverty.
But that, once again, will be at the expense of working and middle New Zealanders facing more intrusive, penny pinching local taxes – from car parks to phones to Christchurch rebuild accommodation. These are the result of the Government balancing their books at the expense of yours – while waving the proverbial wet bus ticket at multinational tax avoidance.
Our tax system must be fair to all – and that includes multinationals paying their fair share. Because in the end somebody has to pay.
David Cunliffe is Labour’s Revenue Spokesperson.