Research commissioned by Tax Justice Aotearoa and the Better Taxes for a Better Future campaign, shows that some of the richest multi-national technology corporations - like Facebook and Amazon - are paying very little tax on the money they are making in New Zealand, meaning we are losing out on potentially $100s millions each year in revenue that we desperately need to fund our schools and hospitals. 

But the research demonstrates there are options under current legislation to crack down on this corporate tax avoidance and the Better Taxes for a Better Future campaign is calling on all political parties to commit to addressing this problem.

Read report

“These tech giants rely on local infrastructure and public services to be able to generate income here in New Zealand, which is estimated to be to the tune of at least $3 billion a year. But by using tax minimising practices these companies are avoiding paying to help maintain these services they rely upon,” said Nick Miller, author of the report. 

“The report focuses on three models of tax minimisation. The “service fee” model involves local subsidiaries of multinational tech firms paying substantial “service fees” to related offshore subsidiary, for example Facebook NZ earned $166.6m in revenue, but paid a service fee of $157.4m to Meta Platforms Ireland Ltd, resulting in just $3.9m in taxable income. It appears all or part of these “service fees” may in fact be "royalties" which would be subject to withholding taxes in New Zealand,” said Miller. 

The other two models discussed in the report the “inflated licence fee” and “service company” models operate in similar ways to shift the bulk of the companies’ revenue offshore and limit their taxable income in New Zealand.

Earlier this year the government dropped the proposed Digital Services Tax (DST), due to concerns about retaliation from the US. The DST would have required some of the largest global corporations to pay more tax in New Zealand. This left at least a $100 million plus revenue gap.

“But there are other measures already available to the Government. More rigorous enforcement of existing tax obligations against tech giants, reviewing existing legislation to prevent the type of tax avoidance identified in the research, and introducing measures to require more transparency from multi-nationals are all practical and important steps, which could potentially raise even more revenue than the DST,” said Miller.

“Simply enforcing the 5% withholding tax rate on service and license fees, that is already provided for in NZ-US double taxation agreement, against Google, Facebook, Amazon Web Services and Microsoft would have generated about $130 million in tax revenue over the last year.”

“This is money that could have been spent on over 10,000 extra elective surgeries, 1400 social housing units, or a properly funded school lunch programme, which the government cut by $130 million in 2024,” said Glenn Barclay, Chair of the Better Taxes campaign and Tax Justice Aotearoa.

“The failure to properly enforce the tax obligations on these big tech companies has much wider ramifications for our economy in the long run. The more we allow digital companies to avoid  their tax obligations, the more existing economic activities will be incentivised to adapt their business model to take advantage of these preferential tax minimisation strategies,” said Barclay. 

“The report confirms what many have long been concerned about. With this evidence, it is a no-brainer for the Government to pursue these big corporations for the tax they owe, especially given the need to generate more revenue to fund our hospitals, pay our teachers, build the infrastructure we need, and respond to the challenges of climate change, poverty and inequality. We shouldn’t be letting billionaire tech giants off the hook, while our school kids go hungry,” said Barclay.

“We’re calling on all political parties to commit to cracking down on tax avoidance by big tech and other rich multi-national corporations, as part of wider measures to ensure corporations are paying their fair share,” said Barclay.  

Read the full report here.

Report recommendations

Based on this research Tax Justice Aotearoa and the Better Taxes campaign recommend the Government:

• Direct Inland Revenue to dedicate existing resources, and provide additional resources, to investigate the tax practices of these large corporations and enforce existing applicable legislation.
• Review existing legislation to ensure statutory obligations to pay withholding taxes on royalties cannot be evaded through the mischaracterisation of payments.
• Increase transparency, including through public country-by-country reporting and amending the Companies Act to require all subsidiaries of overseas headquartered companies to file accounts publicly.