Is Labour going to tax on turnover?

March 23rd, 2013 at 4:00 pm by David Farrar

The Herald reports:

Apple’s New Zealand division made sales of $571 million last year but paid only 0.4 per cent of that in .

’s Revenue spokesman David Cunliffe said that’s akin to paying nothing at all, and letting a corporation get off “scott free” is something New Zealand taxpayers shouldn’t have to stomach.

That’s because you pay tax on profits not turnover.

Is Labour saying that they think companies should be taxed on turnovers, not profits? I hope they spell this out well in advance of the election!

Should be about as popular as saying it is a no brainer to tax purchases from overseas websites.

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41 Responses to “Is Labour going to tax on turnover?”

  1. Pete George (23,559 comments) says:

    That’s repeating what David Clark tried a campaign on, surprising to see David Cunliffe try the same thing, he should know better.

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  2. Muzza M (291 comments) says:

    They do this in the Philippines, consequently tax evasion and corruption is rife.

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  3. seanmaitland (500 comments) says:

    So…how much income tax and GST did Apple end up putting in the NZ public coffers?

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  4. Changeiscoming (189 comments) says:

    Yet another reason not to vote for them!

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  5. YesWeDid (1,048 comments) says:

    Is Labour saying that they think companies should be taxed on turnovers, not profits? I hope they spell this out well in advance of the election!’

    No, they are saying that companies should pay their fair share of tax.

    Apple and Google and others avoid paying NZ company tax by setting up shell companies in low tax countries like Bermuda. It’s a world wide problem that UK prime minister David Cameron recently spoke about, saying ‘When some businesses aren’t seen to pay their taxes, that is corrosive to the public trust’.

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  6. OECD rank 22 kiwi (2,752 comments) says:

    Tax is theft.

    If Labour feel so strong about Apple not paying “Their fair share” then why don’t labour organise an Apple product burning ceremony on the grounds of parliament. All the labour MPs can throw their iphone and ipads into a raging bonfire. It would make lovely picture.

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  7. Johnboy (16,529 comments) says:

    Why would sensible Godzoners waste $571m on Apples shit?

    Wankers and posers springs to mind! :)

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  8. Inky_the_Red (759 comments) says:

    “Should be about as popular as saying it is a no brainer to tax purchases from overseas websites.”

    When a major NZ importer (like the Warehouse) imports goods into NZ they are hit with 15% GST. When David Farror of I import goods from Amazon we pay no duty. How is this fair?

    When GST was established in the mid 1980s few people imported goods for themselves. There was no internet. Also there was no cost effective mechanism to collect a levy on those imports. Now imports by indiviidual is easy and widespread. If a cost effective mechanism exists then why not tax them? What not have an even playing field? If GST is a good idea then why should it only apply to goods and services purchased in NZ?

    Of course a universal FTT would be the way that I’d replace GST. However if you have GST then apply it consistently

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  9. gazzmaniac (2,307 comments) says:

    YesWeDid
    They are not avoiding paying tax in New Zealand at all, since their New Zealand operations are owned by an offshore shareholder and no doubt pay them a dividend each year. That money gets taxed in the shareholder’s place of residence, not in the place it was generated. It doesn’t matter what jurisdiction they send their New Zealand profit to, the New Zealand government still wouldn’t get any. That’s how trade works.

    Do you think that Fisher and Paykel should pay tax on their operations in Mexico and Thailand? Or should they pay their tax in New Zealand, where they are based?

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  10. davidp (3,581 comments) says:

    On the other hand Clare Curran does her best to promote Apple products on Red Alert:

    http://blog.labour.org.nz/2011/02/20/what-to-do-with-your-ipad/
    http://blog.labour.org.nz/2010/12/22/ipad-causing-problems/

    I have trouble understanding Labour. One minute Curran is all in favour of open source software. Next minute she is expressing her love for the most closed platform on the market. Then the manufacturer of the same closed platform is evil for not paying enough tax, including tax on the profits on Curran’s sales presumably.

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  11. gazzmaniac (2,307 comments) says:

    Inky – People in New Zealand don’t import their own products to save 15% or so. They’re saving more like 50 or 70%. 15% at the border is going to do nothing to change that disparity, it’s going to cost the government more than they will make to administer it, and will generally be a pain in the arse for the customs service and post office.

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  12. Inky_the_Red (759 comments) says:

    gazzmaniac

    Exactly the price are much lower. So why not pay the same proportion of the consumption tax if it is cost effective.

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  13. OECD rank 22 kiwi (2,752 comments) says:

    Inky, because it is fun to pay no tax.

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  14. Steve (North Shore) (4,561 comments) says:

    Labour should also look in their own back yard. How much Tax are the Unions paying/not paying/avoiding?

    Suck on that kumera Mr silent T

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  15. mister nui (1,027 comments) says:

    So, will we see an article in a similar vein next weekend from Ms. Paterson and the Labour Party, stating that Air NZ only paid 0.6% tax last year?

    Tax of 23 million on sales of 3.634 billion…

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  16. Johnboy (16,529 comments) says:

    Hasn’t Unite paid yet Steve (NS)? :)

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  17. JC (955 comments) says:

    The way I see it.. Apple pays its NZ workers a salary which is fully taxable by the NZ Govt, further, every Apple product sold in NZ has a GST which the Govt gets.

    If the Govt wants to tax Apple profits then it needs to have a competitive tax environment that would encourage Apple to set up its HQ here.. or simply not be greedy and be satisfied with its GST, tax on salaries and the productivity the country gets from using Apple products.

    And about that profit sent overseas.. think again.. the profit is earned in NZ dollars which are useless to the company if the money is sent to say, Ireland. So the company *sells* its profit dollars (via a money exchanger) to some foreigner who needs Kiwi dollars to invest or spend in NZ, so in the practical sense we retain that company profit in NZ as well. This is why nearly all countries try to attract foreign investment.. for employment, tax on salaries and GST, productivity through investment, information exchange and new skills and the company profits are retained.

    As for GST on items from (say) Amazon.. I don’t know what’s the average price paid but you can buy a huge array for less than $100. The GST amounts to $15 or less.. not a lot for a tax gatherer to get excited about.

    JC

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  18. mister nui (1,027 comments) says:

    It’s actually 0.5% for Air NZ, because revenue is actually 4.483B, the number I had above was passenger revenue.

    I expect Ms. Paterson and Labour to be outraged by this, being that Air NZ is a kiwi company and they should be “paying their fair share”!

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  19. duggledog (1,556 comments) says:

    As evidenced when we had to hand over the Rainbow Warrior bombers, Labour doesn’t understand power. NZ has none on the world stage except in… rugger

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  20. wreck1080 (3,907 comments) says:

    It really shows complete incompetence if Labour don’t understand the difference between turnover and profit. I can’t believe they could be that stupid.

    But, some UK politicians are pushing the same idea.

    My 2 cents worth though — the Government tax base is being eroded through foreign online retailing and foreign companies shifting profits out of NZ and into Ireland.

    So, given that govt still needs the money to fund operations how do we meet the increasing shortfall due to real diminishing tax returns?

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  21. V (719 comments) says:

    “paying their fair share” – perhaps the most ill-defined terms in history!

    WTF is ‘fair’, and who decides? One thing is for sure ‘fair’ is defined as more and more every year.

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  22. UglyTruth (4,551 comments) says:

    wreck1080,
    Establishing a legitimate revenue source would be a good start, rather than treating people and corporations as equals.
    But to do this would involve discarding the existing civil system in favour of a lawful one. From the responses I’ve seen so far I doubt that kiwis are ready for such a radical notion.

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  23. Sir Cullen's Sidekick (888 comments) says:

    Bros – Just wait until 2014 when the Labour-Green-NZ First-Mana combo takes over. They will tax the hell out of anything and everything to spend on their maniac schemes. We will be Cyprus of the South Pacific. Remember the financial transaction tax Jumbo Anderton was suggesting on any withdrawals and deposits? So when your salary of say $5,000 is deposited, Norman will get 2% of that as tax.

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  24. Steve (North Shore) (4,561 comments) says:

    “Hasn’t Unite paid yet Steve (NS)? ”
    Well you see Johnboy – there is this red carpet thing, and shit gets put under it

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  25. SPC (5,619 comments) says:

    How can any rational person infer that someone does not understand the difference between turnover and profit, simply because they note the low taxes paid on sales turnover?

    Are you claiming that Cunliffe does not know what the company tax rate is and how the tax paid was determined? Really?

    Clearly his point was the amount of business here for such a low profit, if this was the real return then it was a poor use of their resources. So low one would suspect the company itself must determine their profit return to be much higher to continue to do business here.

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  26. Dr. Strangelove (18 comments) says:

    In Q4 2012 Apple reported $36 billion in revenue, and a quarterly net profit of $8.2 billion, which is about 23% of revenues. Assuming a tax rate of 35% on net profits, tax would amount to about 8% of revenues. If apple is only paying 0.4% of revenues in tax in NZ then that means their operations in NZ must be vastly, really vastly, less profitable here than in the rest of the world. That’s one twentieth of what you would expect based on their global revenues and profits.

    For that to happen they must be giving away stuff here, pretty much at cost.

    Of course what’s really happening is that they are using bs transfer prices for intellectual property to pretend that they make no money here in NZ, and that all the profits occur somewhere else. By pure coincidence “somewhere else” will have lower taxes.

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  27. lofty (1,310 comments) says:

    I know…if Apple are not paying enough tax according to the opposition…ban them from trading in NZ. Period.

    We don’t need the GST, wages and PAYE, or the subcontractors and suppliers & retailers business, get more folks on the dole, that’s the answer boys, more dole = more votes, what a strategy…

    Fuckin idjits!

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  28. dog_eat_dog (780 comments) says:

    I love all these apparent BCG analysts claiming that businesses should run at a certain profitability. Many many well known names maintain regional presences in some parts of the world that are never ever going to be profitable. They’re there because a competitor is and they can’t not be seen there.

    And good luck to Cunliffe in trying to unilaterally set an aggressive transfer pricing regime. The rest of the world is already taking a long look at it, and arguing against working towards a consensus on something like TP is like pissing into the wind. Not to mention that anything too aggressive could become an issue when it comes to trade negotiations…

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  29. SPC (5,619 comments) says:

    It cannot be both a failure to operate profitably in some regions and an issue of transfer pricing.

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  30. itstricky (1,830 comments) says:

    Talk about ridiculous nit-picking to score points.

    He’s talking about the tax that should have been paid by Apple.

    Nothing to do with the difference between turnover and profits.

    And to make the whole statement/intent of your post “Will Labour tax on turnover?” – that’s just plain bollocks, frankly. Again -: a completely B-O-R-I-N-G political point scoring on some minor grammar technicality. It’s not even clear that Cunliffe is directly quoted on the Herald statement about turnover and tax.

    The actual subject, however, is interesting.

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  31. Psycho Milt (2,412 comments) says:

    Is Labour going to tax on turnover?

    Never mind that, who’s this Scott guy the Herald knows about who isn’t paying his taxes? Something should be done!

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  32. OECD rank 22 kiwi (2,752 comments) says:

    Starve the State.

    Bring it all down, bring it all down!!

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  33. Fentex (974 comments) says:

    It’s pretty obvious that mention of turnover compared to slim taxation is intended to suggest the reported, and taxed, profits are being manipulated in an unfair fashion.

    I personally suspect Apple makes more than the half million odd dollars profit their tax rate seems to suggest on half a billion dollars turnover. If they’re not I’d like to suggest they hire better staff.

    It’s ignoring considerable context to clutch ones pearls and tell campfire scary stories about the bogey men over this.

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  34. Kimble (4,438 comments) says:

    Nobody wants to pay your stupid taxes.

    That right there is a fundamental truth. Dont tell me what Apple should be earning, how they should be structuring their business, how much profit they should be earning, and how much tax they should be paying. Thats all irrelevant. They will pay zero dollars if they can, and you cant expect anything different.

    Anyone who wants to suggest a “solution” to this “problem” has to do more than describe the rule they would put in place. They have to describe, honestly and completely, all the real world ramifications of that rule change. If you arent willing to do that, then you’re doing nothing but whining and you should shut the fuck up.

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  35. Jim (398 comments) says:

    Johnboy wrote:

    Why would sensible Godzoners waste $571m on Apples shit?

    Wankers and posers springs to mind!

    You’ve just described all NZ males who refuse to shop at The Warehouse.

    I’d be more concerned about this:

    “‘The Warehouse Group Limited had adjusted net profit after tax excluding unusual items of $65.2 million on sales of $1.732 billion for the 52 weeks ended 29 July 2012.”

    Why would sensible Godzoners waste $571m on China’s shit?
    Trailer trash and mouth breathers spring to mind!

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  36. Jim (398 comments) says:

    Uh, copy ‘n’ paste fail.

    Why would sensible Godzoners waste $2303m on China’s shit? (Apple+Warehouse)

    That’s not counting Acer, Dell, HP, Lenovo, … (just about everything else)

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  37. Nigel (514 comments) says:

    Globally their gross margin is 41%, so what apple is saying is that they spent in NZ they managed to spend or deduct 234 million in gross profit before taxation.
    I could be wrong and might have missed the apple stores being built in nz or the data centres, but I don’t see alot of apple infrastructure in NZ, so in this case I think labour have a point and infact the OECD is currently working on global standards for multinational taxation ( http://www.oecd.org/newsroom/oecd-urges-stronger-international-co-operation-on-corporate-tax.htm ).

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  38. lofty (1,310 comments) says:

    Nigel, you just sent a shiver down my spine…thanks, and so early on a Sunday morning too.

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  39. jakejakejake (134 comments) says:

    Sounds like a Tui ad. Apple makes 0.4% profit on sales of $571,000,000.

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  40. Kimble (4,438 comments) says:

    People who insist Apple is cheating on tax have proof to back it up.

    Yeah right.

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  41. SHG (316 comments) says:

    The criticism would be a bit more compelling if it wasn’t coming from someone who uses a Family Trust – perfectly legally – to minimise the amount of tax he has to pay.

    Hon David CUNLIFFE (Labour, New Lynn)
    Beneficial interests in, and trusteeships of, trusts:
    Bozzie Family Trust (discretionary)

    http://www.parliament.nz/NR/rdonlyres/DFA6C21E-69A8-433F-8BA9-956431281F7F/222223/register2012_3.pdf

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