Latest Herald tax is only 0.09% of revenue

February 19th, 2014 at 4:00 pm by David Farrar

As readers will known both APN and Fairfax editorials have stated certain companies do not pay enough tax in comparison to their revenue.

I believe tax should be on profit, not revenue. But the editorials of the Herald and Dom Post do not seem to agree. It is for their benefit I have proposed a campaign of 15% of revenue as a fairer tax system.

APN announced their full year results today. They are:

  • Revenue $817m
  • Profit $2.6m
  • Tax (at 28% of profit) $728,000

Now this means they are paying tax at a rate of only 0.09% of revenue. This is appalling by their own editorial’s standard. At a 15% living tax rate, they should pay $123 million in tax. I look forward to their voluntary payment in line with their editorial stance.

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32 Responses to “Latest Herald tax is only 0.09% of revenue”

  1. igm (881 comments) says:

    APN/Fairfax staffing overheads would be colossal, taken they are basically union run. Maybe if they were taxed on revenue it would force them to cull some Labour/Green supporting messengers-of-the-left, masquerading as journalists.

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  2. doggone7 (494 comments) says:

    Funny how a suggestion of a different approach to taxing and the seeming hypocrisy of a major company instantly heads down the road of attacking unions and political parties.

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  3. Chris2 (708 comments) says:

    The TV3 Campbell Live show has championed a ‘Living wage’ (sic) too.

    How much tax do they pay?

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  4. holysheet (196 comments) says:

    As I was reading this, I looked out the window and saw a herd of pigs flying past.

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  5. igm (881 comments) says:

    Campbell is on borrowed time, advertisers are pulling away from his programme of socialist propaganda in the droves, so if the reformed company are intent on retiring debt and becoming a respectable unit, these types will no longer be in the swill line at trough time.

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  6. burt (7,096 comments) says:

    Campbell live can illegitimately hide behind the “It’s different when Labour do it” line. His bias is appalling – I refuse to watch him.

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  7. RRM (8,997 comments) says:

    :-P $728,000 seems like rather a lot of tax to pay when your profit is only two dollars and sixty cents…??

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  8. virtualmark (1,423 comments) says:

    DPF. Totally agree with your sentiments on the idiocy of calculating a “fair rate of corporate tax”.

    But note the APN numbers are in Australian dollars, and are for the entire APN group across Australia, NZ & Hong Kong. I don’t have numbers to hand on what tax they might have – or probably have not – paid the IRD. But the tax number you show is A$ tax paid to the ATO.

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  9. freedom101 (439 comments) says:

    DPF, have you seen the play “Waiting for Godot”? Let’s play “Waiting for Granny Herald” – somehow we already know the ending, which somehow spoils the story.

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  10. unaha-closp (1,035 comments) says:

    :-P $728,000 seems like rather a lot of tax to pay when your profit is only two dollars and sixty cents…??

    Little known side effect of weight loss – as your fingers become less pudgy the keys you hit while touch-typing change??

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  11. burt (7,096 comments) says:

    DPF

    How about The Labour party television station TVNZ – what sort of ratio of earnings do they pay in tax?

    I know it’s different when Labour do it – but given their recently made public (we always knew it right ?) affiliation with the Labour party – it would be interesting to reveal how they also comply with the party line.

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  12. burt (7,096 comments) says:

    Breaking news: Campbell to refuse his current salary and only accept 3x the single beneficiary income. He was reported as saying – It’s the least I can do given my strongly held socialist views.

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  13. davidp (3,329 comments) says:

    virtualmark>But note the APN numbers are in Australian dollars, and are for the entire APN group across Australia, NZ & Hong Kong.

    But by the Cunliffe-Clarke FaceBook tax rules, companies should pay tax in NZ even if the services are entirely delivered overseas. No doubt some NZers read APN’s Australian publications online. Therefore those Australian publications need to pay tax in NZ.

    Labour should add APN’s overseas web sites to their proposed ban list.

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  14. Fentex (664 comments) says:

    I believe tax should be on profit, not revenue. But the editorials of the Herald and Dom Post do not seem to agree

    Does this not slightly mischaracterize the discussion? Isn’t the issue that people suspect either our tax law has loop holes it ought not have, or certain businesses are unfairly (I don’t know if anyone has suggested illegally) manipulatingtheir affairs to

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  15. Fentex (664 comments) says:

    [I don't know how that posted while I was typing]

    …manipulating their affairs to avoid reportable profits and the discrepancy between large turnovers and little tax is a clue this is happening?

    I have no idea what the profit/loss and general financial situation of Apple NZ is, but for a business that turns over so much in sales in NZ they certainly seem to declare a surprisingly small profit, and if I were of a mind to be suspicious of a large corporations accounting it’s the sort of detail that would attract my attention.

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  16. chris (460 comments) says:

    I’m not trying to defend corporate practises to minimise their tax paid, but Apple do not sell direct to the public in New Zealand unless you are buying from their website or from iTunes.

    If you’re buying from their website, you are buying from Apple Australia and it’s shipped from Australia (at least it was the last time I bought direct from them). Any profits made are under Australian tax jurisdiction. However, they probably are on-billed by another division somewhere else for the product (it’s not made in Australia) for practical reasons and also to shift tax liability elsewhere.

    If you’re buying from iTunes, the products/service you are buying from is not in New Zealand and you aren’t buying from an NZ company. I’m not sure where in the world NZers buy their iTunes stuff from, but it’s not NZ (might be Singapore).

    As far as local sales of product are concerned, the stuff is retailed through 3rd parties which would make Apple NZ the middleman / importer*, assuming the retailers even buy from Apple NZ. They might buy from Apple overseas and the local office facilitates orders and delivery.

    (* which is not different from any local importer of product selling to local retailers, like my parents used to do. Turnover may be high, but that doesn’t necessarily mean profit is.)

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  17. slijmbal (1,134 comments) says:

    @fentex

    DPF is using The Herald’s own mischaracterisation of the discussion to point out the enormous fallacy in their own representation of the matter.

    Though I would have thought that is obvious.

    But yes, the real question is whether the likes of transfer pricing are being abused. As a business owner who also had a subsidiary in OZ I can say if you’re small you don’t get to manipulate transfer pricing but if of a significant size you can afford the right accountants and lawyers to play the game properly.

    Shame the Herald doesn’t bring up the real matter but not a surprise.

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  18. chris (460 comments) says:

    And actually, if I recall correctly, everyone used to have to buy Apple product wholesale from Renaissance who in turn imported it from Apple. I’m not sure if Renaissance have this stitched up anymore, I think the deal got canned at some stage.

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  19. duggledog (1,119 comments) says:

    What is this ‘Herald’ you speak of?

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  20. lolitasbrother (354 comments) says:

    haha this is great Farrar, everybody loves the Herald, even the Standard

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  21. gump (1,232 comments) says:

    @chris

    “I’m not sure where in the world NZers buy their iTunes stuff from, but it’s not NZ (might be Singapore).”

    —————————

    In NZ we buy iTunes content from Australia (via APPLE PTY LIMITED – ABN 46 002 510 054).

    So no GST is collected on the sale.

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  22. UrbanNeocolonialist (136 comments) says:

    I struggle to understand how people think it is sensible to allow multinationals like facebook, amazon, google, various fast foodies etc to continue use transfer pricing to off-shore their profits. Can they not see how it confers a big cost advantage to them over any NZ businesses trying to compete with them in the local market?

    (simplistically) Imagine if all tradesmen rented their tools off of holding companies in the Caymans, or if farmers rented all of their bulls at massively inflated prices from companies in off shore tax havens – would anyone be happy for their taxes to raised to compensate for the lost revenue?

    So why should internet service providers get a free ride? They gather revenue from providing services to kiwis in NZ, so surely we should be looking for a way to collect tax on activity the same as we would for any NZ based company doing the same thing – otherwise you are simply encouraging/forcing companies (particularly as they grow in size) to take themselves offshore in order to be competitive. How can pushing head offices overseas be anything but negative for growing NZ?

    It’s perhaps more understandable if some commenters here or their clients have a vested interest in the status quo, but the distortion it creates in the economic landscape can’t honestly viewed as a good thing.

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  23. doggone7 (494 comments) says:

    Fentex: “…Does this not slightly mischaracterize the discussion? Isn’t the issue …”

    My comment about the issue being turned into anti-union and Labour/Green got rubbished. igm seems to think that is the issue and apparently has supporters. The points in the last paragraph of your second post, (accepting the later comments about Apple,) highlight the issue. Seemingly weird things happen but as slijmbal says big outfits with clever accountants and lawyers use all their skills to manipulate
    the game.

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  24. Viking2 (10,747 comments) says:

    I noted that Chalkie made the point about Countdown that the NZ business had a debt to the Aussie business of 1.5 billion on which interest is charged.
    No doubt the well capitalized company is using that to suck funds from the NZ customers as are all the Aussie banks in someway.

    SBS 2 year rate 5.8%
    Aussie scumbags 6.29 and upwards.
    http://www.interest.co.nz/borrowing

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  25. burt (7,096 comments) says:

    UrbanNeoColonialist

    You make valid points. The problem is … We do it too. We have online stores where people outside of NZ can buy NZ goods and no tax is paid in that country. The status quo as so favoured when faced with difficult problems is clearly flawed.

    It seems governments have been pretty efficient at signing up two way tax agreements for dealing with chasing defaulters, to me it seems these deals need reconfiguring for electronic trading. Either that or we stop bleating about it and accept its a problem we don’t yet know how to solve and get about solving it.

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  26. Jack5 (4,231 comments) says:

    Chris2 posted at 4.29:

    The TV3 Campbell Live show has championed a ‘Living wage’ (sic) too.

    How much tax do they pay?

    The question, Chris2, is how much tax DIDN”T they pay. The receivership arrangement for TV3′s owner entailed the IRD forgiving millions owed in tax.

    The way to solve the problem of GST-free overseas purchases via the Net can be easily solved – by abolishing GST. It doesn’t suit the international computer age, especially for a small agricultural country that imports most of its consumer goods.

    We need a freeze on total tax, and replacement of GST by a capital gains tax, which, regardless of what the thicker members of National think, is a better tax than GST for national growth. The best form of capital gains tax from a national point of view is death duties. These are cheap to collect, and if they were set up so that family businesses (the main sufferers under this tax) were given time to pay, CGT would be an efficient and pretty fair tax. Some countries have introduced other CGT variations that help small family firms in other ways, compensating hard working folk who take most of their reward when they sell the firm at the end of their working life.

    Above all, however, we need to stop the tax take as a proportion of say GDP frome growing , and if possible shrink the proportion slowly. An expanding, more productive economy will provide more tax without pain.

    Meanwhile there’s been a lot of international thought and experiment about types of tax. As a small economy with a one-tier government that allows fast decisions, we ought to be think, talking, and trying different tax recipes, keeping in mind we want the total take to be as small as reasonably possible.

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  27. questions (132 comments) says:

    David, you do yourself a disservice claiming that these Parties support taxation calculated on revenue, it is simply not true and you know it.

    The reason they state the revenue in relation to the final amount of company income tax paid is to demonstrate the farsicality of the tax arrangements of these companies. They are not mentioning revenue in order to suggest that companies be taxed on revenue, they are mentioning to demonstrate the real size of these businesses in New Zealand.

    They are shifting profit offshore in order to have it taxed at a lower rate, you know this.

    The Labour and Green Parties are pointing out that if these companies keep using such abusive tax structuring, eventually the tax system will be adapted in order to tax the actual profit that these companies are making, not the amount their accountants manage to whittle down to on a piece of paper, again, profit not revenue.

    You know this, please stop being so dishonest about it, it effects your credibility.

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  28. igm (881 comments) says:

    Tv3 deserve to be down the gurgler after the programme of communist propaganda and baseless shit they ran last night. To make it even worse, Snake Kelly was giving her views on unionism and fiscal viabilities. with collective bargaining. This rubbish went years ago, and sooner or later CTU, its leeching executives, and doctrine will also go.

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  29. Alan (922 comments) says:

    This again ?

    Isn’t the clear difference that APNs profit figure, as it struggles in a dying industry, is a real reflection of their results where as Apples isn’t. It’s artificiality lowered by inter company trades.

    APN and Fairfax aren’t demanding that anyone pays tax in relation to turnover, but that companies accurately report profits.

    The premise behind this thread, is dishonest.

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  30. Ed Snack (1,540 comments) says:

    It seems that the majority of “Apple doesn’t pay NZ tax wah wah wah” commentors are unaware that NZ has fairly wide ranging tax laws that define how foreign companies in particular can order their affairs in NZ. These laws cover such matters as transfer pricing and thin capitalization; so the supposed “crime” of manipulating prices so that profits are transferred overseas is only permissible to the extent that our current laws permit (and of course are enforced).

    I do believe that you will find that it is quite legitimate to price the items that Apple (for example) bring into NZ at the level that they do so that the margin that Apple claims in NZ covers their operating costs in NZ plus a profit. None of the profit relating to the manufacture and marketing actually occurs in NZ, so why should NZ feel entitled to some of that gain as tax ? It is de facto legitimate so far as the IRD has not objected to Apple’s (again, Apple is just an example company) pricing calculations. Are people therefore claiming that the IRD is corruptly assisting foreign companies to escape the NZ Tax net ? That would be against all the behaviour of the IRD as I have ever observed it.

    So the crying out about foreign companies paying little tax is merely another excuse for the general approach: “These people have money, I want money, therefore I am justified in making claims that these people morally are obliged to give me some.” In other words, sheer greed and avarice.

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  31. wreck1080 (3,533 comments) says:

    @ed snack — good comments. I think jealousy drives many of the anti-corporate comments.

    However in saying that, it is widely reported that apple have the largest profit margins on their devices. Effectively you pay an apple tax when buying them.

    So, I would expect apple do make a fairly decent profit in NZ. They have very few overheads here either, such as apple stores.

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  32. Ed Snack (1,540 comments) says:

    Wreck, but why, they sell the devices into NZ at a price that covers their cost and margins up that point. Why do they have to give away part of their margin; a margin earned where they develop, manufacture, and market them; to NZ where they do none of that ? They could, but IMHO, they don’t have any obligation to.

    Yes Apple charges a premium (one BTW I pay as my family is the satisfied owner of 3 Macs (2 laptops), two iPads, two iPhones, and three iPods; although the iPods are now largely superseded except the nano for music on the go when an iPhone is too big) but is optional, there are many other devices with “similar” functionality out there, many of which (especially in the Phone space) are sold at a marginal profit or a loss.

    BTW, if it is “appropriate” to appropriate some of Apple’s profits in NZ, should we also pay some of (say) HTC’s losses on sales in NZ ? What’s sauce for the goose…

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