An organisation I co-chair, NZRise, has been looking at the problem. We represent New Zealand owned digital companies who generate jobs and good incomes for tens of thousands of Kiwis. Our research shows Facebook, Google, Amazon and many other global digital companies are engaged in similar tax avoidance schemes to Apple.
Most revenues that accrue to those companies from New Zealand simply don’t get reported. They are the result of an online transaction and the money flies out of the country in the blink of an eye. No tax. No multiplier effect. No 41 per cent investment into our society.
From a business owner’s perspective it also represents a huge disincentive to invest in R&D, which is already at shockingly low levels by international standards. We find ourselves at a disadvantage to our multinational competitors.
Why create software and technical services in New Zealand when we will always be facing uneven tax playing field?
New Zealand has had a problem with multinational companies and transfer pricing for decades.
Yet the problem Christie writes about is on a different scale.
While the old multinational would shuffle money to minimise liabilities in New Zealand, they still paid some tax. They employed people, trained people and contributed to the economy in other ways. They funded university chairs, sports clubs and other worthy causes. If the new breed does any of that, it’s invisible.
The new multinationals pay next to no New Zealand tax. They employ next to no New Zealanders. They contribute little to the economy.
Sure, you can argue that Apple products make New Zealanders more productive and that’s a positive economic contribution. The net positive economic contribution may even be greater than Apple fails to contribute in more direct ways.
That is an argument against banning or boycotting Apple products. No-one is suggesting that.
It is not an argument against taxing Apple.
After all, our roads carry Apple products to market. Our schools give people the skills people need to use Apple products. Our health system keeps Apple’s customers alive and healthy. In some cases our tax dollars buy Apple products.
You could argue something similar about Google. Some believe Google software makes workers more productive than they would be with other software. Maybe.
Some think that Google’s activities in the advertising sector has an economic benefit. Try saying that to a New Zealand journalist or someone who works in the media.
Again, these are not arguments against taxing Google.
Google is quite happy to sell its products and services to New Zealand government departments that it doesn’t help fund.
It’s harder to argue Facebook offers any economic benefits to New Zealand. If anything it undermines productivity. It is the digital equivalent of an all-sugar diet.
Christie has a good point
There’s little chance Apple, Facebook and Google will stop selling if we force them to pull their economic weight.
Until recently the problem was limited. Most of the non-contributors were technology companies. That’s changing with services like Uber muscling in on our markets. If things continue, the giants will hollow out our economy. Let’s not allow that to happen.
It’s been said that what the companies do is legal. That’s true. It doesn’t make it right. We have the power to change that. We have left this problem in the too hard basket for too long.