Matt Nippert: Airbnb doesn't walk its talk on tax

Accommodation provider supports bed tax while its head office avoids paying a cent. Photo / 123RF

Airbnb thinks Kiwis would be surprised to know that it supports Phil Goff's proposed bed tax.

Brent Thomas, the head of policy for Australia and New Zealand for the multi-billion dollar Silicon Valley company that is the world's largest accommodation provider, said this week: "We collect and remit bed taxes and tourism in over 400 locations. We actually support these. We support the idea that the Airbnb community continues to pay its fair share."

But while the company is willing to help collect a bed tax on behalf of the "community" (its hosts), it shouldn't surprise anyone that it doesn't appear to be nearly as enthusiastic when it comes to paying tax itself.

The company has no local subsidiary registered in New Zealand (perhaps to avoid triggering permanent establishment rules), meaning no local accounts are filed, and local operations appear to be run from Australia.

This makes getting hard financial data about the company's local operations difficult. But international reports and unpicking this week's boosterish report on the company's contribution to the economy, reveal the deep contradiction in Thomas' position.

Airbnb's hosts themselves need to account for their rental income to New Zealand tax authorities. But local hosts renting out a spare bedroom for a couple of thousand dollars a year are unlikely to have the wherewithal, or chutzpah, to employ multiple subsidiaries in borderline tax havens to - totally legally - avoid the long arm of the Commissioner of Inland Revenue.

The story of Airbnb and its complex international structuring should be familiar to anyone who has followed technology giants in the business pages. It's the story of weightless companies using modern-day flags of convenience to disrupt both markets and tax bases.

Airbnb operates on a similar basis to ride-sharing company Uber, structuring itself to act as the middleman in transactions from which it collects a fee. The Financial Times reports that this fee ranges from 9 to 15 per cent, suggesting the company last year clipped between $18.5m and $30.9m from helping to rent out New Zealand properties.

And where does this fee go? It pays to check your invoices: several seen by the Weekend Herald issued by the company all give the counterparty as Airbnb Ireland UC.

Why Ireland? The company told the Guardian 18 months ago it was to "capitalise on Ireland's global reputation for technology and utilise the vast tech-savvy and bilingual workforce," but there may be other reasons.

Ireland's tax regime has actively courted multinational companies over the past decade, offering low tax rates - and huge deductions - if companies book their international earnings there.

Ireland's headline corporate tax rate is 12.5 per cent, compared to New Zealand's 28, but Bloomberg reported the tax rate for multinationals in Ireland was effectively 1 per cent.

International taxation - particularly in the digital space - is complex and apportioning which jurisdiction is entitled to what tax can be difficult. But Airbnb's Irish solution applies even to the 35 per cent of local stays last year which the company classified as domestic tourism.

That is: even when New Zealanders booked New Zealand accommodation from other New Zealanders (using a United States software service, no less) it is classed as an Irish transaction.

Request for comment to Thomas, and Airbnb representatives in New Zealand, were answered by a written statement from Australia.

The statement described the company as a "different kind of business model to many tech companies," where most of the money from every transaction was paid to local hosts.

As for the Irish strategy, the statement said they were doing nothing illegal: "We follow the rules and pay all the tax we owe in the places we do business."

Airbnb has only recently broken even, reporting a US$100m profit on global revenue of $3.5b. This modest profit, followed by years of losses as it pursued growth, means the tax question has only now come into sharp focus.

And it will be an increasingly vexing topic: even with growth of 150 per cent a year, the company's present structure will see it avoid all tax in this part of the world once it becomes - as expected - wildly profitable.

Facebook and Google have used variations of the above Irish strategy to shunt transactions into havens. Mounting pressure, including a cameo role by then-Prime Minister John Key lambasting Mark Zuckerberg at the 2016 Apec summit, saw both those tech companies this year pledge to stop offshoring revenue and report local revenue locally.

If Airbnb really supports paying its fair share, it would do the same. Registering a subsidiary at New Zealand's Companies Office and filing annual accounts would be a good start.