Uber pays $9397 tax from $1m

Uber drivers are paid 75 per cent of a passenger's fare. Photo / Michael Craig

Internet transport firm Uber used controversial and complicated international tax structures to reduce its New Zealand tax bill to around that of an average Kiwi worker, records show.

Through a structure known as "Double Dutch" accounting, the online transport network channels revenue to subsidiaries in the Netherlands that hold earnings and minimise its worldwide tax bills.

According to financial accounts filed with the New Zealand Companies office, Uber declared gross revenues of $1,061,018 in New Zealand in 2014 but paid just $9397 in income tax. Someone on the average wage of $45,000 is taxed about $7800 through PAYE.

When someone catches an Uber service, 75 per cent of the fare goes to driver and the rest is sent to parent company Uber BV in the Netherlands. In an article last year, Fortune magazine explained one per cent tax was paid to the Dutch government when royalties were sent to another Dutch Uber company, costs were deducted, a share was sent to another Uber-owned firm in Bermuda and then a small percentage was sent back to local branches such as those in New Zealand.

The activity is not illegal and former Inland Revenue manager Adam Hunt said the "Double Dutch" structure was common in the digital economy. There was an argument if they didn't minimise tax they paid they could be considered negligent by their shareholders, "which is why law is the only way to stop it".

Hunt said it was important to remember all of their drivers' earnings were liable for tax and GST if over the threshold. But using the Double Dutch system meant Uber wasn't contributing to the infrastructure that makes their business possible: roads, police and educated customers.

In a statement, an Uber spokesman said the company complies with all tax obligations in New Zealand.

Revenue Minister Michael Woodhouse referred the Herald to the IRD, which said it didn't comment on individual taxpayer affairs.

A Herald investigation this year revealed the 20 multinational companies most aggressively shifting profits out of New Zealand - which did not include Uber as the company's reported operations were considered too small - paid virtually no income tax, despite recording nearly $10 billion in annual sales.

Uber has come under fire after it set up its own vetting system and stopped requiring drivers to have passenger endorsements - a legal requirement for anyone being paid to take a passenger in their car. The company - which says it provides a "rideshare" service - said it implemented its own process because of "existing red tape".

But Transport Minister Simon Bridges said the company couldn't "cherry-pick" the laws they didn't like.

"The rules are the rules and they've got to follow them. Under the old regime and the new one, they have to have a [passenger] endorsement and the reason for that is really simple - the safety of our people."