How?

January 7th, 2014 at 3:00 pm by David Farrar

The Herald reports:

says it will tackle “aggressive avoidance” by multinationals such as Facebook and Google which it says is costing the taxman hundreds of millions of dollars each year.

How? A magic wand?

Local concerns were fuelled last year when iPhone and iPad maker and iTunes owner Apple reported paying just $2.5 million on $571 million worth of New Zealand sales in 2012. Google and Amazon’s tax bills were also tiny in comparison with their reported sales here.

Economic illiteracy continues. Company tax is based on net profit, not on gross sales. Any comparison of tax to sales is misleading.

Labour revenue spokesman David Clark yesterday said: “We certainly think there’s a lot of aggressive avoidance going on.”

He said the party was continuing a major research project on the issue and would be more proactive than the Government in addressing it through policies likely to be released before the election.

Again how? Are you going to ban them from selling to NZers unless they pay more tax here?

If Labour want to be credible on this they need to specify what actual changes they would make to tax laws, so we can assess whether or not it would result in one extra cent of revenue.

 

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64 Responses to “How?”

  1. F E Smith (3,315 comments) says:

    More financial illiteracy from the our self-appointed guardians. Do they not check what the politicians say?

    These people expect respect and legislative protection why?

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  2. Joanne (177 comments) says:

    Groan, yawn. As a former tax accountant, I just groan and count to 10 at some of this ‘crap’. David Clark is an earnest man, but he shows his ignorance. Roger Douglas was the last finance or revenue minister I took much notice of.

    My message to David Clark – don’t put your grubby little mits on the tax legislation unless you understand it and the implications of what you do, which up to now you have shown you don’t.

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  3. Adolf Fiinkensein (2,833 comments) says:

    ……just $2.5 million on $571 million worth of New Zealand sales in 2012……

    Apple will tell them to fuck off and learn how a 33% tax rate yields $2.5m from taxable income of $7.5m. Apple’s gross profit might be 20% of sales ($114m) with legitimate deductible costs of $107m.

    But then, what do you expect from a failed Presbyterian minister?

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  4. Pete George (23,326 comments) says:

    As part of their research Labour should do a quick check on OECD as they have done quite a bit on it. They point out…

    Unilateral and uncoordinated actions by governments responding in isolation could result in double – and possibly multiple – taxation for business. This would have a negative impact on investment, growth and employment globally.

    They’ll have to do a lot more than be “more proactive than the Government”.

    Unless all they are doing is trying to appear as a superficial Labour good, National and multinationals bad.

    Labour’s targeting of multinational tax avoidance

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  5. Alan (1,082 comments) says:

    A while ago I worked for a manufacturing company, we made an electronic part which we shipped to our client 100 metres away.

    We “sold” the item we produced to our sister company in the Netherlands Antilles for cost plus 4%, they then “sold” the item to the customer at a 75% markup. All the profit existed in Aruba, where very little tax was paid.

    I’m pretty sure that apple and google perform the same trick, with large internal cross charges for “management fees” etc.

    Why are Labour highlighting this ? I’d have thought it’s fairly obvious, they are going to run this years election campaign on a meme of “fairness”. You’ll hear things like “sharing the proceeds of growth” & “crony capitalism” a lot this year. They’re going to run on an attack on an “out of touch elite, getting the benefits while others struggle through a cost of living crisis”

    It’s mostly shit of course, but it’s good politics and will play well with a lot of people. If the do it right, they’ll win.

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  6. Fentex (909 comments) says:

    Economic illiteracy continues. Company tax is based on net profit, not on gross sales. Any comparison of tax to sales is misleading.

    Any comparison? A large imbalance between the two could never be prima facie evidence of tax avoidance?

    That’s a dubiously high standard for suspicion that isn’t routinely displayed by many. It seems to me to be arguing instead of smoke indicating there must be fire that smoke can never indicate fire – by far, I think, the weaker of the two propositions.

    I think claiming only a pittance of profit on half a billion dollars of turnover of high end consumer goods is sufficient smoke to suspect a fire, enough to go look if it is there.

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  7. Alan (1,082 comments) says:

    interestingly, Apple globally recorded a gross margin of 37% in the past qtr. The figure in high tax locations like NZ are obviously being suppressed by accounting techniques.

    The management is of course obliged to act in the best interest of the shareholder, and no one else

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  8. anonymouse (708 comments) says:

    I’m pretty sure that apple and google perform the same trick, with large internal cross charges for “management fees” etc.

    Google “double irish dutch sandwich”, and no it’s not some kinky euro threesome….:)

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  9. greenjacket (436 comments) says:

    David Clark does not understand that tax is paid on profit, not turnover.
    This level of ignorance would be worrying enough coming from an ordinary MP, but that such nonsense comes from Labour’s spokesman for tax issues is scary.

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  10. kowtow (7,945 comments) says:

    This shows the depth of Labours’ ability.

    Their revenue spokesit is a Presbyterian minister who specialises in marrying men to each other…..

    His financial capability probably runs only as far as the fricken flax basket passed around the rainbow chapel at offering time…..

    A far cry from the good old Scots Presbyterians who would be OK if they were in charge of social welfare …….”Och , you Jimmy,aye you laddie, fuck off and get honest employment afore you come here with yon begging bowl…..”

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  11. In Vino Veritas (138 comments) says:

    Clark “thinks” there is aggressive tax avoidance going on. The article acutally points out that what Clark thinks is tax avoidance is company’s legally minimising their tax. What a nob.

    Alan, interestingly enough, there are already tax laws in place to prevent transfer pricing which is pretty much what you are claiming here, and by selling to the Antilles (a tax haven) I’d imagine the IRD have been over the transactions with a fine tooth comb.

    Fentex, you should do accounting 101 and then start a business of your own. Gross sales is absolutely no indication of taxable income. To argue so is to argue the world is flat. Apple NZ has $551m of gross sales and a gross profit of only $19m. They paid $531m for inventory. And guess what? They can charge Apple NZ as much as they like for their iPads, iPods, Macs etc. On top of that they incurred other costs in NZ including sucking up an $8m FX loss.
    The company in NZ is owned by Apple Pty Ltd in Australia, which is in turn owned by Apple Inc in the US. Related party transactions are spelt out in the financials. Cunliffe and Clark are just being pricks to wind up their dwindling support base.

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  12. Pete George (23,326 comments) says:

    Clark confused revenue with profit last time he attacked this issue when he was previously spokesperson for Revenue. He should have learned then because he modified his media release.

    He was moved to other responsibilities, then Cunliffe put him back on Revenue – plus Spokesperson for Small Business and Associate Finance Spokesperson.

    This article isn’t quoting Clark confusing revenue and profit, it’s fuzzy on that. It’s hard to tell if it’s the reporting or the Labour source, and whether Labour are deliberately leaving it open to interpretation without clearly stating it.

    However despite having the input of David Parker it still sounds like amateur hour.

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  13. flipper (3,843 comments) says:

    Alan (767 comments) says:

    January 7th, 2014 at 3:31 pm

    A while ago I worked for a manufacturing company, we made an electronic part which we shipped to our client 100 metres away.
    *********

    Years ago the Todd family pretty much owned a company called Europa which distributed and sold gasoline throughout New Zealand. They purchased the stock from a wholly owned (by them) West Indies company (with the knowledge of Fraser, Nash and Nordmeyer), and took the profits in that tax haven. IRD came down on them, the tax lawyers rubbed their hands in glee, but the IRD won.

    The Todds cut financial support for Labour whose bureaucrat functionaries, Lewin and Datsun @ I & C, had busted the Todd family’s sweet deal. ( The Labour pollies were pissed. But IRD had pushed the case so they could not intervene and it cost Labour thousands of pounds in financial support.)

    But that was a New Zealand owned company playing that trick via a wholly owned tax haven based company. Apple (or whichever) is not NZ based so there is no possible means of controlling tax minimisation and price manipulation.

    Ergo, sans an international treaty with 100% international buy-in, the whole Clark/Parker line is bullshit. But don’t hold your breath for the MSM to pick up what I have just written and do a proper follow up.

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  14. david@tokyo (263 comments) says:

    As a related issue, if a Labour government were to (somehow) tax these online vendors extra, Labour should also make it clear to voters that a consequence of such policy would be higher prices.

    These vendors aren’t selling stuff for a giggle.

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  15. Manolo (13,517 comments) says:

    Any person with surname Clark should be banned for life from public office.

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  16. Fentex (909 comments) says:

    Fentex, you should do accounting 101 and then start a business of your own. Gross sales is absolutely no indication of taxable income.

    I disagree (both having studied accounting and economics in my student days and my business is healthy, thank you).

    Obviously there is no simple one-to-one relationship, expenses reduce profit, tax is on profit. I doubt few discussing the subject do not know these things.

    However tax avoidance as well as minimisation occurs, and if you look for it, finding places where you can identify high turnover of high margin goods but low declared profits is possibly a place where you will may find avoidance.

    It certainly is not a comparison that is always misleading.

    Obviously Labour hopes to incite a popular anger to serve their own ends and they may be picking on the wrong people in doing so, but that is a fact open to investigation, and I think people announcing a cynicism regarding Labour should reserve just as much cynicism for wealthy companies with just as much motive to serve their own ends.

    As my tutor told my class on our first day “You should be looking to pay as much tax as you can” because knowing you only pay as much as you should the more the better.

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  17. Pete George (23,326 comments) says:

    This is all just early posturing. The “How’ will be proof of Clark’s ability will be whether he can come up with anything “likely to be released before the election”. He’s picked a big challenge complicated by it’s international complexities for someone who hasn’t got any policy to his credit yet.

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  18. Akld Commercial Lawyer (165 comments) says:

    Hmmm, as pointed out by others above, this is a topic that makes for good headlines that appeal to some parts of the electorate. Sadly, the facts are very complicated and there are a multitude of overlapping interests here.

    As one post notes above, there is work being done in this area by the OECD and others. And as a number have already pointed out pointed out, revenue does not equate with profits. For example, Apple reportedly make very little margin on most of their products sold in this country. What they supply is largely, I am told, about extending their market footprint for the future. Equally, I would expect that some of the other big overseas corporates have followed the same pattern that they seem to have adopted elsewhere of being quite disciplined about which branches of the business earn profits. This is not especially insightful (or sinister) there will be expenses and revenues throughout the chain of distribution – and it may be that the costs of servicing a very small, remote, market such as NZ are a loss leader for some.

    At stake also are Govt IT contracts. Both the local IT industry and others, such as big brands with a substantial footprint in this country employing people and buying goods and services in this country, will find it helpful to point out when bidding for Govt work that they pay a large amount of GST and other tax in this country and therefore their bids should be assessed on a level playing field-type basis when compared with (say) a tenderer that does not have such a local footprint.

    None of this is news to either the IRD, Treasury or the govt. It comes through in almost every piece of economic policy and, in the context of my day job, some of the feedback from official circles about new legislation – that Treasury or the IRD are concerned about this or that policy proposal. Something that might appear quite orthodox to help one type of activity could be seen as a risk to the tax base. Even from my small window on the world, I can list examples of where new developments have provided opportunities that much more creative minds than my own have taken the ball and run with it in ways that were not at all expected. Hence such activities that have made the headlines such as the IRD litigation against the big banks over some of their capital structuring activities that were shown to cannabilise the tax base.

    Another constraint is provided by CER – as Canberra is often very quick to remind NZ that the privileged access to the Oz market comes with obligations, including by not providing soft options for multinationals seeking to backdoor restrictions in Australia via NZ.

    Personally, Parker has zero credibility in my household since he lent his name to the Power NZ lie – but this is just political attention seeking. Orthodox and easy in Opposition, the reality in Govt is much harder. Here’s hoping that by being party to blatant bullshit over Power NZ means that its a long time before a left of centre Govt is a phrase we have to mouth.

    And incidentally, I continue to hear over the barbecue that the Power NZ snowjob cost the taxpayers more than just the depressed price and demand for MRP & Meridian. Anecdotally, the level of hedge fund activity that this tragically naive crusade engendered – meant that many of us were fleeced twice at least. So they made the folk they profess to hate – even richer. How ironic.

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  19. Jack5 (4,895 comments) says:

    But would Labour tackle the big tax loophole of registered charities? Notably Ngai Tahu businesses and the Seventh Day Adventists’ Sanitarium Corp.

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  20. Fentex (909 comments) says:

    Labour should also make it clear to voters that a consequence of such policy would be higher prices.

    Speaking of economics this doesn’t follow. Few companies, and certainly not Apple, price their products cost plus.

    Australasia pays more for Apple products than markets such as the U.S, not because of transport costs (we’re closer to the factories) not because of compliance costs (NZ has by far less bureaucracy in business) but because Apple charges what the market will pay and they have long had a certain cachet among consumers for the quality of their work.

    Possibly closing some loopholes, rearranging regulations, such that Apple pays more tax on it’s business may very well not translate to higher prices as sufficient competition exists to dissuade Apple from raising prices.

    Speaking of which some analysts recently downgraded Apples stock because they fear Apples cost for manufacturing the iPhone 6 is too high and that competition will preclude Apple from charging it’s usual mark ups. This would appear to be something Apple knows about given their recent new designs – it looks to me like forward thinking about competing more aggressively with comparable devices.

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  21. rouppe (942 comments) says:

    Anyone who thinks that Apple (and a host of other multinationals) aren’t rorting tax law are dreaming.

    Apple’s products were invented by engineers in the USA. However all Apple domestic companies are charged a huge fee for IP from the nominal parent or holding company which is based in a low tax jurisdiction. This holding company makes massive profit from doing nothing other than being a holding company.

    Now these charges are totally legal. But also totally bogus.

    Personally I think this ought to be dealt with, but for Labour to say they will deal with it is nonsense. It has to be dealt with by large groups of countries in unison. Hence the OECD looking at it, though I doubt they’ll ever get anything done.

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  22. igm (1,413 comments) says:

    Once again Labour dropping ideas of envy to appeal to the useless losers that support them. It amuses me to note that those with the big ideas about how to fiscally run this country have no record of financial success themselves. Show me one that has a successful record in any commercial or private enterprise venture . . . not one.

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  23. burt (8,025 comments) says:

    Enough people are stupid enough ( hell they vote labour right …) to believe that putting up the top income tax threshold will punish rich pricks and therefore punish international rich prick corporates too…

    They Labour voting muppets were comfortable being fleeced by fiscal drag for 9 years because Dr Cullen told them he was taxing the rich …

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  24. Paulus (2,562 comments) says:

    Is the Revenue Spokesperson the Reverend Dr David Clark the great financial expert from Otago ?

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  25. flash2846 (222 comments) says:

    Dear the Dumb-arsed of New Zealand

    We will tell you anything we think you want to hear because we want to get elected and we know you are too stupid to question what we say.

    Yours faithfully
    The NZ Labour Party

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  26. Mobile Michael (432 comments) says:

    Cug our company tax rate to less than Ireland and we’ll start seeing all those transactions flowing into NZ.

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  27. jp_1983 (200 comments) says:

    simple, apple stops importing products to nz.
    nz itunes store closed

    we are an island nation, so we can control communications, ban imports then the ‘tax dodgers’ will cease to be a problem.

    DPRK is a fine example of how to live /sarc

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  28. Adolf Fiinkensein (2,833 comments) says:

    Here’s what happens.

    Labour manages to steal an election and immediately changes the tax laws to make companies pay 20% of gross revenue as income tax.

    Apple, Google etc say to the socialist gummint “Up yours” and close down their NZ operations completely. No redundancy, no two weeks notice to staff. Everyone came to work one Monday to find the offices closed and deserted. On the door of each one was a notice.

    “Dear valued employee. If you want a job, go and see Rev Clark. He took your job away.”

    They then launch massive TV campaigns encouraging Kiwis to buy their products online, thereby avoiding the payment of GST.

    “Oh shit” squeal the socialists as their total revenue from taxation dries up. “You can’t do that.”

    But we can and we have! You just forgot we could.

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  29. Nigel (515 comments) says:

    They are absolutely doing it and globally. But solving it is not going to be something nz can do, it’ll be by irs and Brussels, nz will just get the benefit.
    If we are going to talk economic literacy, what possible costs are there in nz for apple, it has no infrastructure to speak of, so for sure the books are being tweaked, but as I say the issue is global and won’t be resolved by some sabre rattling labour flunkie.
    I think everyone who says trying to go alone will backfire are absolutely correct, but worse than that currently nz actually gets a lot of stuff reasonably promptly, it’s unrealistic that would continue if labour make political capital like this, better to more quietly support global efforts to manage corporate tax.

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  30. Kimble (4,410 comments) says:

    Looks like they are gearing up to emulate the Australian Labor Party.

    Swann, Wong, and Gillard spent the proceeds of a mining tax that eventually raised only an embarrassing fraction of what they forecast (at odds with every independent forecast of the same).

    Labour is planning to spend up large in election promises and will inevitably announce that they’ll “balance” their budget by clawing back taxes from those rich, foreign, mega-firm bastards.

    Labour: real expenditure, fantasy taxes.

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  31. Dave_1924 (100 comments) says:

    When you look at it generating such a low gross profit on a turnover of half billion of sales, for a high margin business like Apple’s, is a very clear indication of some creative accounting. The sell top end, luxury priced goods. They are being slowly dragged back to a commodity standard by competitors in some markets e.g. smartphones, but clearly they charge over the top for their goods.

    Tax Minimisation is a big issue in all jurisdictions – it will need addressing by large groupings of countries to solve. however don’t forget that Apple generates revenue for the NZ Government via Wages, expenditure on office supplies and crucially GST.

    Still the whole transfer pricing issue and the issue of the global market place via internet purchases not subject to GST will need addressing at some stage by all governments otherwise all their tax bases will be heavily eroded over time.

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  32. Johnboy (15,586 comments) says:

    You’re all missing the point. Labour doesn’t have to speak sensible stuff or deal to the tax avoidance chaps.

    They only have to keep stating a message that resonates with say thirty to fifty percent of the folk with the IQ’s of less than 100 that populate Godzone but are still allowed to vote and their in mate! :)

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  33. Johnboy (15,586 comments) says:

    That’s where Helen Kelly’s lot and the Teacher unions are so valuable to a snake like Silent. He can’t bullshit sensible folk but he can con those dumbfucks! :)

    One tale for them and another for the rest of us that are thick enough to believe his shit! :)

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  34. wreck1080 (3,807 comments) says:

    NZ tax revenues will be under pressure as people turn to foreign internet purchases

    I assume by the howls of outrage that kiwis will be only to happy for income tax increases so that amazon and co. can continue pay 2% tax on profit in Ireland.

    I hear a lot of howling, but, little constructive input on what can be done.

    If anything, perhaps NZ should offer a 1% tax rate so we can attract some of these multinational companies to us.

    1% of a trillion dollars is better than 30% of nothing.

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  35. Johnboy (15,586 comments) says:

    Silent/Parker will soon be announcing their plans to combat the black economy.

    If it involves the abolition of cash in their first year of office I will probably vote for them! :)

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  36. Alan (1,082 comments) says:

    This obviously isn’t about tax, economics or money. Facts don’t matter.

    It’s 2014, an election year, all that matters is the politics of it.

    Many people are having a tough time of it, mortgage rates are going to rise pre-election; The cost of living is going to be a hot topic.

    Labour are floating this because they think it fails the sniff test and people will think it’s unfair. I suspect they are right and the public are receptive to this message.

    Don’t under estimate the left, they are good at this and will say anything to win, a lot of people are open to the message.

    The iPredict market shows a 47% chance of a Labour led administration at the end of this year. I think that’s fair, this is heading to be the closest election in history.

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  37. Johnboy (15,586 comments) says:

    Most of us wealthy chaps would love mortgage rates to rise as our divvy’s will go up! :)

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  38. Archer (188 comments) says:

    It’s a bit ironic of the Herald to be doing a story like this. How much tax did they pay last year? Zip. Zero. Nada.

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  39. Pete George (23,326 comments) says:

    I think that’s fair, this is heading to be the closest election in history.

    How would it be closer than 2011?

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  40. OneTrack (2,818 comments) says:

    dpf – “Economic illiteracy continues. Company tax is based on net profit, not on gross sales.”

    That may be the situation now, but, when they become government, there is nothing to stop them changing the rules to whatever they want. So if they want 70% company tax paid on sales, no matter how stupid that is, they can do it. They’ll show those rich prick neolibs.

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  41. kiwi in america (2,477 comments) says:

    Labour were in power for 9 years and Google and Apple were operating in New Zealand for at least some of their tenure paying similar taxes to the amounts Clark is bleating about today. If they were so concerned about ‘tax rorts by multinationals’, they had years to do something about it. Perhaps someone ought to ask Michael Cullen why they didn’t.

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  42. Bogusnews (460 comments) says:

    Having worked with overseas companies here in NZ I have a pretty good idea how this will end up and it has all to do with size.

    NZ’ers forget how tiny our market is. Typically our turnover makes up the margin of error on a large multinationals financial reports. For example, I worked with a decent sized (in NZ terms) pc manufacturer. They tried to get some preferential pricing from Intel for CPU’s as they were purchasing between 5-6000 units a year. Intel just laughed and said when they were buying 100x as many they would talk.

    Labour will need to consider things carefully. Given how little in global terms we mean to Apple I’m not sure it would be very bright to cause too much trouble.

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  43. burt (8,025 comments) says:

    I have found it ….. The solution….

    See: http://www.stuff.co.nz/business/money/9583070/Smoker-grows-her-own-to-beat-tax-hike

    It’s illegal to give away home grown tobacco … Why not make it illegal to give away anything that is taxed by the government and then just tax everything…. We can simply lock up anyone who has any money and that will solve the problem and the country will be glorious without rich pricks ….

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  44. burt (8,025 comments) says:

    Bogusnews

    We are talking about Labour here…. They don’t give a shit about long term outcomes – it’s all about getting elected. That’s all – no more no less.

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  45. Alan (1,082 comments) says:

    @ PG “How would it be closer than 2011?”

    Good point well made, 2011 resulted in a 1 seat majority for the right.

    This year will be harder contested, I think Labour and the rest of the left would have been surprised on election night in 2011 to have come within 10,000 votes of being able govern. I think they assumed defeat, and coasted a bit, Goff didn’t inspire. A bigger effort with turnout in core labour areas (see 2005) would have got them over the line.

    This time they know they can win, and will surely go much harder with a leader who the party faithful elected.

    National don’t really deserve to lose, sure some of the day to day political management has been clunky, but they have sorted out public finances pretty well and deserve 3 more years.

    I just don’t see how they can win, the strategic failure to allow space for a party to flourish to their right is going to kill them.

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  46. ross69 (3,652 comments) says:

    “company tax is based on net profit, not on gross sales”

    You seem to be suggesting that Apple’s net profit is a fraction of gross sales. How can they remain in business if that is the case? You also seem to be suggesting that Apple isn’t avoiding paying tax. Is there any evidence of this?

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  47. kiwi in america (2,477 comments) says:

    ross69
    Why didn’t your mates in Labour do anything about this during the 9 budgets they passed that could’ve put legislative teeth to this populist pap?

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  48. burt (8,025 comments) says:

    kiwi

    Labour were taxing the rich. Sadly though under their definition of rich locked and loaded for 9 years by the time they were done 75% of high school teachers were classified as rich pricks.

    The dim-bulbs like ross69 will probably never remember shit like that … They are too busy reading this weeks slogans to remember the past.

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  49. burt (8,025 comments) says:

    ross69

    Don’t be such a fucking idiot. That 1,000 phone you think you should get as an election hand out…. It cost money to make. Raw materials don’t just morph into a phone you know. Try telling Apple they should pay $333.33 in tax for each phone cause that’s fair cause you had to earn $1,500 to have $1,000 to buy the phone … Oh that’s right – you want other people’s money don’t you. Take some more from the guy running the phone shop – he doesn’t need it. How about the guy driving the van delivering them – make him cart Apple products for free too….

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  50. Dirty Rat (383 comments) says:

    If I’m not mistaken, this would relate to Transfer Pricing and Thin Capitalisation….there are all ready rules in place that have tightened it up.

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  51. Ed Snack (1,797 comments) says:

    Ross69, are you suggesting that Apple should pay its entire earnings in tax, just because you’re a greedy bastard ? Why does Apple owe anything in Tax in NZ ? Taxes should be paid by people, people who get the benefits. Companies in NZ only pay taxes to the extent that it pays them on behalf of its shareholders. When you receive a dividend from the profits, the tax paid by the company becomes tax paid on your behalf and you can claim that tax already paid as part of your tax on income.

    Apple makes very good profits by designing and manufacturing things people actually want to buy. Prices too high, bull, people pay the price and Apple is not without competitors. Disclosure, I have several i-devices and macs.

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  52. Fisiani (993 comments) says:

    Labour have to get more people voting Labour if they want to be in government.
    The Labour plan to get more votes is simple. Get people to vote for emotion versus logic. Typical emotions that will be used are Greed Envy and Anger.
    Greed – Offer sector groups more free money. Pensioners -promise higher pensions , students -offer universal benefit, beneficiaries -offer in work tax credits. OK I know there is no money to pay for this but when has that eber stopped Labour pandering to Greed.
    Envy – point out (ie outright lie) that all the gains of the last 6 years have gone to the top 1% of earners
    Anger – Rev people up about injustice , unfairness and promise that it will never happen under Labour ( stop laughing)

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  53. meanybeany (26 comments) says:

    How, you ask.

    How about pushing for an international treaty where a multinational corporations total profit (USD 49 billion in Apple’s case) is split by country on the basis of turnover (USD 171billion). So, 28% of Apple’s $551 million NZ turnover would become the “deemed profit” in New Zealand and would become subject to our income tax.

    A treaty like this could have widespread support as most OECD countries are losing massive amounts of tax revenues because of tax planning practices which meet the letter, but not the spirit, of the law

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  54. burt (8,025 comments) says:

    meanybeany

    That’s simply not going far enough. How about if they want to sell the product in a country they need to manufacture it in that country and employ local people to do it. That worked so well for cars in the past and how stupid was the government allowing car manufacturing ( assembly ) to pull out of NZ allowing imported vehicles to flood the market with lower cost better quality cars…..

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  55. kiwi in america (2,477 comments) says:

    meanybeany
    Did Labour revenue ministers ever once in the 9 years they held the treasury benches propose such a treaty? They didn’t. Have you ever wondered why? Labour is engaging in cheap populist rhetoric that cannot survive scrutiny in the real world of governing.

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  56. meanybeany (26 comments) says:

    Kiwi in America
    That is a non-argument. You could say about anything any government does: “why didn’t they do it sooner?”. The scale of the lost tax revenues has only become apparent since 2009, especially as government tax receipts have fallen around the developed world.

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  57. UrbanNeocolonialist (231 comments) says:

    I am right wing, but this is a silly beat-up on Clark/Labour.

    This offshoring of profits is a big problem that needs to be addressed as it is conferring huge commercial advantage to multinationals to the detriment of local competition and companies. That can not be viewed as anything but negative.

    All of these multinationals are employing transfer pricing schemes to offshore profits to low tax locales thereby increasing profitability and reducing their capital costs. (Eg Starbucks purchasing outrageously expensive coffee from starbucks owned supply companies in low tax locations, Google charging certain high cost services from companies in low tax locations to their subsidiaries in high tax locations etc).

    The govts of the world are getting very tired of this behaviour, and there will be increasing measures to stop it. It will be possible to do so given the political will – and it is only sensible for countries to enact such measures when it otherwise hurts or puts businesses within their own economies at a competitive disadvantage.

    The big question is how to do it in a manner that produces the lowest compliance costs and unwanted distortionary effects. That is something that is worth spending a lot of time and effort studying to do it in the best way possible. There will be a lot of international government interest in harmonising such systems and structures and never fear, these companies will still do business here even if their profitability is reduced by increased tax.

    Eg simplistically (and no doubt naively) most of these e-tailers and international service providers can probably be hit by tracking electronic payments made to them from domestic bank accounts (probably relatively easy to enact), and hitting those payments with a tax (eg GST) so at least then local businesses aren’t comparatively disadvantaged – as it will increase the cost of using them. (Admittedly it will no doubt require a lot more complexity and subtlety than that to do the job effectively). Could also locally levy tax on global profitability but local turnover for multinationals (kills effectiveness of transfer pricing tricks). Also punitive penalties for tax avoidance behaviour (and clear guidance on what constitutes avoidance) would probably produce voluntary on-shoring of profits.

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  58. wreck1080 (3,807 comments) says:

    @UrbanNeocolonialist : good summation in that we need to sort out these multinationals dodging tax at my expense .

    Your solution is not good though. I don’t think it would be easy at all. but ,I don’t have any solutions either, except for joining the low tax jurisdiction game.

    I do wonder why the big economies do not place more pressure on Ireland who are legalising tax evasion.

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  59. itstricky (1,696 comments) says:

    Get people to vote for emotion versus logic. Typical emotions that will be used are Greed Envy and Anger.

    Fisani – UrbanNeocolonilanist’s logic seems pretty simple to me. Your emotional response could result in more “whatcha gonna do” questions, or it could offer some sensible suggestions to claw back avoidance which is, as one earlier poster put it, in the letter, but not the spirit, of the law.

    I thought a bunch of righties would be all over that. But I guess not, now that I think about it. The whole “you scratch my back I’ll scratch yours” mentality lends to turning a blind eye when needs be – even if it’s large multinationals (because greed – another emotion – kicks in – they fancy a piece of that pie themselves). At least some above recognise a ruse when they see it and happily stand up and make themselves known (and consequently a target, of course)

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  60. ross69 (3,652 comments) says:

    Weirdly, DPF failed to quote the most important part from the article:

    Mr McClay acknowledged the disadvantage suffered by local firms competing with overseas rivals who paid little or no tax here was “the crux of where the real challenge is” in terms of taxing multinationals. Some local tax laws were already being tightened up in line with OECD recommendations last year on base erosion and profit shifting.

    Problems around taxing multinationals would be top of the agenda at November’s G20 meeting in Brisbane. While Mr McClay said he wasn’t particularly optimistic about an outcome from that meeting, “ultimately a number of countries are going to have to come together and consider the best way forward”.

    So National supports Labour on this issue, yet DPF decides to criticise Labour! Pathetic.

    Meanwhile Apple pays about 2% tax on its overseas profits. No doubt the Right are outraged and we’ll soon be getting a long blog post from DPF saying how this has to change. :)

    http://www.theguardian.com/technology/2012/nov/04/apple-paid-low-overseas-tax

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  61. ross69 (3,652 comments) says:

    Apple makes very good profits by designing and manufacturing things people actually want to buy

    Apple makes very good profits by rorting the system. Even an intellectually challenged right-winger knows that.

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  62. burt (8,025 comments) says:

    ross69

    It’s simply not fair is it. I mean really there are people working at Apple getting paid more than a beneficiary in little ‘ol NZ and that consumes the money they make selling phones … The money that should go to the NZ government so it can afford to give every beneficiary an iPhone with an I love Labour App on it….

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  63. itstricky (1,696 comments) says:

    So National supports Labour on this issue, yet DPF decides to criticise Labour! Pathetic.

    And National have no more ideas than Labour. So perhaps the “How?” should apply to them as well. Both as useless as each other. Or not; as far as DPF is concerned.

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  64. burt (8,025 comments) says:

    The lefties are all excited because the pattern of the flip flop from red to blue to red is playing out textbook like 1999. The previous Labour government having decimated the economy (1990) is replaced by National to administer a tough budget and massive spending cuts, a few terms of National government and the economy is gently recovering. Enter Clark & Cullen who promise their special union friends the world and promise to increase social spending. A few terms later the economy is stalled, the structurally sound economy of 1999 over stimulated for short term gains has tanked, National roll in (2008) to administer a tough budget and spending cuts. A few terms later the economy is gently recovering. Now … 2014 … Labour are talking up social spending and union friendly employment policy… What do we do NZ … Take the red pill and gorge ourselves for 6 years only to be 1990 Groundhog Day again or do we reject the notion it’s time to lush it up on other people’s money because it’s simply not sustainable.

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