The improved financial position saw the business – ultimately owned by Nasdaq-listed giant Meta Platforms – make significant inter-company payments to Meta’s Irish subsidiary.
Facebook New Zealand purchased $149.3m of services from Meta Platforms Ireland last year, according to the accounts. An additional “inter-company payable’” of $47.6m was also made to the Irish company, bringing the total paid to Dublin to more than $196m.
The services fee dwarfs the $84m paid to Facebook Ireland in 2021, with a further inter-company payment of $30m also made that year.
Facebook’s NZ business paid a little more than $1m in local company tax last year, up from $605,000 in 2021, the accounts show.
Facebook has been asked for comment.
The accounts highlight the difficulties faced by local tax authorities as they look to capture income earned by multinational technology companies.
Most companies in New Zealand pay a tax rate of 28 per cent, while Ireland has a headline corporation tax rate of 12.5 per cent.
Legislation introduced to Parliament after the Budget is intended to ensure that, eventually, large multinationals pay at least 15 per cent in corporate tax, irrespective of where the revenue is booked.
Smaller beer for a big market
Facebook New Zealand’s $8.7m in revenue for 2022 represents a fraction of the local social media advertising market that the company dominates.
According to Interactive Advertising Bureau NZ estimates, total advertising spending on social media platforms in NZ reached $163.1m in 2021.
The accounting methods used by large tech companies have drawn significant scrutiny and criticism in recent years, forcing Facebook and Google to book more of their profits in NZ and other local markets.
Concerns over Big Tech shifting profits to tax havens by trading intangible goods and services across international borders have prompted multilateral talks to reform the global tax system.
In 2021, G7 leaders unveiled global tax reforms to ensure multinational companies paid more taxes based on their local earnings.
Under the shakeup, multinationals would pay more tax where they earn money, regardless of their physical presence in each country. The plans would also introduce a global minimum tax rate, starting at 15 per cent.
The Organisation for Economic Co-operation and Development has joined an accord to implement the global tax reforms, and talks are ongoing.
The New Zealand Government supports multilateral tax reforms, but ministers have also threatened to introduce a digital services tax if no progress is made. Labour has proposed a 3 per cent levy on local revenues earned by the tech giants in NZ.
