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Time To Get Tough With Tax Dodging Transnationals

CAFCA Says It's Time To Get Tough With Tax Dodging Transnationals

This Is Not Just About One Bad Apple

For several years now the New Zealand media have drawn attention to the scandalously low amount of tax paid in this country by some of the biggest transnational corporations (TNCs) in the world, particularly the digital economy giants such as Apple, Google, Facebook and Amazon.

For instance, in 2016, it was reported that Facebook had paid $43,000 in tax the previous financial year - about the same as "a mid range doctor or lawyer", as the media pointed out.

By definition, tax dodging by transnationals is not confined to New Zealand.

Globally the most spectacular offender is Apple.

In 2016 it was slapped with a 13 billion euros tax bill by the European Commission for what it called "illegal State aid" in Ireland, which gifted Apple a European tax rate of 0.0005%.

But this problem is much bigger than just one bad Apple.

Tax dodging on a truly epic scale is common across all transnational corporations, including in this country.

The previous National government was loath to do anything about it.

In its final few months in power, it did introduce some tweaks around the edges but shied away from a diverted profits tax, which has been implemented in both Australia and Britain to penalise transnationals caught manipulating the tax system.

And what the NZ media called a "shadowy lobby group" - the US-based Digital Economy Group which is believed to include companies such as Google, Apple and Amazon - successfully persuaded that National government to back down even further from its proposed measures to tighten provisions against transnational tax dodging.

National put all its faith in the Organisation of Economic Cooperation and Development (OECD), the rich countries' club to which New Zealand belongs, and the OECD's International Action Plan on Base Erosion and Profit Shifting (BEPS).

Labour has continued with that approach, introducing the Taxation (Neutralising Base Erosion and Profit Shifting) Bill in December 2017.

That is fine, as far as it goes, but the obvious flaw in depending on a international-led solution to this problem is what to do if that international initiative grinds to a halt.

Which is exactly what happened in March 2018 when the OECD announced that BEPS has been deferred until 2020.

Basically it has been put in the too hard basket.

This promptly led to some major countries deciding to take unilateral action. India has already imposed a 6% “equalisation tax” on digital advertising sold by Google and Facebook.

The European Commission (EC) announced it will impose a 3% tax on the revenues of transnationals such as Google, Facebook, Amazon, Twitter, Uber and Airbnb.

Both the Indian and EC measures break from the previous practice of taxing TNCs only on their profits generated in the host country – these new measures will tax those TNCs’ revenues, potentially increasing their tax bills by billions of dollars each.

The underlying principle of these new measures is recognition of the contribution that users make to the profits of “weightless” digital businesses.

The EC announced that this 3% tax is an interim step, pending a longer-term measure.

So, what is this country doing about it?

The New Zealand government said that it was awaiting advice from officials on whether it should also introduce similar “interim measures”.

Thus far, the Government has said nothing about what, if any, advice it has received and what it intends to do about it.

The Campaign Against Foreign Control of Aotearoa (CAFCA) says it's time to get tough with the these transnational tax dodgers.

It's time they are legally compelled to pay their fair share of the costs of the infrastructure, services and benefits of the country which hosts them and allows them to conduct their businesses here.

If that requires "interim measures" or unilateral action, so be it.

ends

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