John Drinnan: Digital not pulling its weight

Spark's Simon Moutter wants digital multinationals to get stuck in, tax-wise.

Companies draw huge profits from NZ but 'shun social responsibilities'.

Spark chief executive Simon Moutter hit a nerve calling for Google, Facebook and other global media players to pay their fair share of taxes.

It's a global problem and, unlike New Zealand, the UK, Australia and France have made progress in forcing global firms to pay a little more of what is euphemistically being called the "Google tax". Google appears to minimise paying taxes by using elaborate structures and there has been belated interest in cracking down.

But the NZ Government response this week indicates there is no rush and it is waiting for a co-ordinated initiative from the OECD.

This suggests the Government does not see the immediate challenges facing local media, which are losing huge tranches of ad revenue while facing tax disadvantages.

Magic wand

Politicians can't wave a magic wand and remove the advantages Google and Facebook seemingly have in advertising and marketing products.

But, in my opinion, the Government's unwillingness to deal with tax minimisation practices has parallels with its laissez-faire approach to foreign trusts.

Earlier this year there were clear threats to New Zealand's reputation, and the Government's response was "nothing to see here". Finally it seemed it was embarrassed into reacting by the Shewan Report, which said NZ's trust rules were too loose.

Its acceptance of tax disadvantages for locals is extraordinary, as the media sector returns to New Zealand ownership, and amid an unprecedented wave of companies forced to merge to compete with the global players.

Spark's Moutter has launched a campaign declaring we cannot afford to wait for the OECD to act on tax. He stresses that tax practices for the multinational digital firms are legal, but, he says he believes those firms are neglecting a social obligation to be part of the local economy and should put something back to support society, given they are taking so much out.

So, why is the Government so blase?

Former Inland Revenue senior official Robin Oliver recently dismissed the idea of a Google tax as a "mirage", and notes similar action could be taken in other jurisdictions against Fonterra, the country's only multinational. But as Moutter notes, there is nothing to stop these global players from behaving differently. Maybe Google needs to be held more accountable for the way it gives so little back.

Google subsidy

The growth of other global media taking more ad revenue could hit the TV industry harder and lead to less local content or more demand for taxpayer help in my opinion.

New Zealand On Air funding policies need to be re-jigged to account for the parlous state of local media.

A recent NZ On air handout to Google-owned YouTube illustrates how policies are being developed higgledy-piggledy. It is a case of taxpayer subsidies for a multinational that minimises its tax bills: New Zealand On Air is giving $150,000 for the Skip Ahead programme developed by YouTube for successful NZ YouTubers to develop webseries content.

YouTube is matching the grant. This might be legal, but in my opinion it's a misuse of taxpayer money.

You can see NZ On Air's logic. Young people are moving online to platforms. It wants more Kiwi content on YouTube: New Zealanders are net exporters on YouTube, so it is worth its while.

At $150,000, the handout is tiny and I have pointed out in the past how taxpayer funding has been used to finance TV commercial ventures such as X Factor. But the YouTube grant suggests that, once again, public money is being captured by corporates.

NZ On Air uses the rationale that "YouTube [is] enabling us to double the size of the programme," said a spokeswoman. But why aren't commercial education providers helping YouTube to train content providers?

Articulate

Moutter gave an articulate explanation about the unfairness of a situation where Google pays only a fraction of the tax paid by New Zealand companies.

Multinationals have always sent profits back to their home base. But Moutter points out these digital media firms can have a tiny footprint with just a handful of staff or none at all. In the past, multinationals have had a substantial footprint here. They hired staff, manufactured products, distributed goods and contributed to the economy.

Spark has said that companies such as Google need to think of having a social responsibility, as other NZ businesses do.

Aloof

One of the problems in dealing with the global media technology firms seems to me to be a lack of transparency and unwillingness to engage with the media or consumers. Approaches to speak to Google for this article were unsuccessful.

Last year I attended a Google media promotion in Taipei. I stayed in a nice hotel and ate nice food. But it was a product promotion and there was scant interest in talking about the culture of the firm.

For some reason the media have come to expect this approach from the global companies. Netflix seems to me to be the same. You can't talk to executives, and the PR consultants are based in Sydney even though the company is taking huge amounts of money out of New Zealand.

• John Drinnan produces the media website zagzigger.com