Tuesday, June 28, 2011

Google are evil tax-dodgers

Google's corporate motto is (famously) "Don't be evil". Sadly, they're not applying it in New Zealand. Instead, they're dodging their taxes, using a dodgy method called the "double Irish":

The company uses a controversial commission model, in which earnings on advertising sales in New Zealand are booked in Ireland, where the company tax rate is lower.

In return, Google Ireland pays a commission to Google New Zealand to cover its expenses.

Google New Zealand is understood to have sold about $150 million worth of advertising in 2009, but its reported revenues hover between $3m and $4m.

The most recent accounts show Google's income tax expense for 2010 is $203,349, including $86,000 extra in tax for 2009 after receiving an additional payment for that year from Google Ireland.

Its all legal, of course, but it robs the New Zealand government of millions of dollars of tax revenue - revenue which could be used to pay for schools and hospitals for ordinary kiwis. And its not as if that money is instead going to help ordinary Americans or Irish instead - the whole point of the arrangement is to arbitrage different jurisdictions to avoid paying tax in any of them. And that is simply evil.

But this isn't just a question of Google's lack of ethics - as Stuff's Tim Hunter points out, it highlights a general problem with foreign owners, and therefore with the government's privatization plans. Currently, our SOEs pay tax. But if they are sold into foreign hands, they may start pursuing these sorts of arrangements instead. So not only will we lose the dividend stream; we'll also lose the tax revenue as well. Just another example of how National is undermining New Zealand.