Facebook and Google were included last week in a list of 20 companies assessed by the Herald as being the most aggressive in legally shifting profits out of the country.
The 20 companies collectively paid just $1.8 million in income tax on nearly $10 billion in revenues.
According to companies office filings the New Zealand subsidiaries of Facebook and Google respectively recorded revenues of $1.2 million and $14.9 million and paid just $43,261 and $361,542 in income taxes.
However industry sources said revenues from New Zealand clients for Facebook and Google were likely to be significantly higher than reported as both were dominant players in a local online advertising market which was assessed last year as being worth more than $800 million.
Several sources spoken to by the Herald – many declining to be named as they regularly conducted business with Google and Facebook – said the companies appeared to make respectively $400 million and $100 million from New Zealand clients.
Richard Thompson of creative agency Contagion said the shift of business online and overseas was significant and a growing threat to government revenues.
‘The issue is bigger than reported but the potential issue is also much bigger than reported.
If you look at the speed of growth in this space the lost taxation from traditional sources to new ones is scary’ Thompson said.
The two companies appear to structure their advertising contracts for New Zealand clients to see them settled offshore in low-tax jurisdictions like Ireland and Singapore.
Both of the internet firms declined to address the estimates of their revenues from New Zealand customers but in similar responses stressed that their operations complied with New Zealand tax laws.
(ed:..that list of things john key can do nothing about is getting quite long..isn’t it..?..)