WILLING TON: New Zealand may be a tiny market for Google parent Alphabet, but the Pacific nation on Thursday struck a blow in the global clampdown on multinational tax avoidance by persuading the US technology group to revamp its local business model. In a letter to the country’s parliament, Google said it was ceasing the practice of booking most of its New Zealand advertising revenues in Singapore, a low-tax jurisdiction. In the future, the revenue from these transactions would be booked in New Zealand, the company said.
Craig Elliffe, professor at University of Auckland, said Google’s New Zealand decision was “a significant move and probably reflects collective pressure from governments around the world to tackle a well documented problem. A key issue is whether the new structure yields a great deal more tax but it certainly allows authorities a more transparent vista”. Google has a small physical presence in New Zealand, where it employs just 30 people. But New Zealanders make more than 10bn web searches a year on its search engine, and Google Maps and YouTube are popular. Google’s parent company Alphabet is the world’s second-biggest company, with a market capitalisation of $774bn. New Zealand’s gross domestic product was $193bn in 2017, according to International Monetary Fund estimates. Wellington began targeting tax avoidance in 2016 and published a bill in December aimed at tackling profit shifting by multinationals. New Zealand’s corporate tax rate is 28 per cent, against 17 per cent in Singapore. But in practice companies can negotiate attractive individual tax deals with the Singapore authorities, which can cut multinationals’ tax bills significantly.
