By Bernard Hickey
The Government has stepped up its rhetoric about cracking down on multi-national corporates not paying their fair share of taxes, with Prime Minister John Key saying he told Facebook founder Mark Zuckerberg that Facebook needs to fix its reputation for not paying its fair share of tax, and the IRD announcing it would target more big multi-nationals over their taxes.
Key was reported as saying he had raised Facebook's reputation for not paying its fair share of taxes directly with Zuckerberg at the APEC summit in Lima over the weekend.
"I was reasonably blunt. I said I thought Facebook did have an issue in terms of its global tax, with the perception of its tax policy. And I thought he needed to change that," Key said, adding he thought Zuckerberg was surprised by his comments.
"I don't think I'm doing him any favours not telling him that because if you think about what's happening with Facebook, everywhere you go when there's a discussion about multinationals not paying their tax, people say 'Facebook'," he said.
"It wasn't so much about whether they pay their fair share of tax in New Zealand or didn't - maybe they do and maybe they don't. But I think when the shorthand for a problem around multi-nationals not paying their tax is 'Facebook' then I can't see how that's a good thing for Facebook. I think as a company they've got a PR issue."
"I do know you've now got the OECD asking all these countries to hold hands together at major tax reforms when it comes to global multinationals, and at the forefront of that, one of those ... is Facebook. There's a bit of a feeling - that would have got Donald Trump elected - that somehow the world wasn't fair."
Key said he had told Zuckerberg "should at least demonstrate to the world that they do pay their fair share of tax in every location."
"I think if they don't, the same people who are its users will wake up one day and say 'why do I have to pay my tax if this company is not going to'," he said.
IRD increases multi-national target list
Also on the multi-national tax debate, IRD Commissioner Naomi Ferguson told multi-national firms to be more transparent and rebuild trust with the public in a speech to the Chartered Accountants Australia and New Zealand tax conference in Auckland on Friday.
She also announced IRD would increase its target list for large companies to 900 from 600, including all multi-nationals with turnover of over NZ$30 million.
“Corporate tax compliance is high in New Zealand and corporates have no need to be shy about telling the wider public about how much they contribute to our country," she said.
“By being more transparent, we can help change the conversation on international tax affairs and rebuild the trust of the New Zealand public in our biggest corporates, especially the multinationals."
Ferguson released a 25 page multi-national enterprises compliance document, which included an update on New Zealand’s progress against the OECD’s base erosion and profit shifting (BEPS) Action Plan.
“The compliance document shows what we’re doing to ensure corporates pay their fair share of tax. Now it’s the turn of the big companies, both locally and foreign-owned, to make sure they’re being transparent too."