Kerre McIvor: Boycott the firms not paying tax

Massive multinationals like Google make money here, but don't seem to pay much tax. Photo / AP

My young co-host on our afternoon radio show has been fulminating over big corporates not paying their fair share of taxes since the show started back in January.

We need to ring the minister's office, Mark said, and we need to ring him every week until they do something about the fact these huge multinationals don't pay enough tax.

I managed to dissuade him from becoming a nuisance caller but you can imagine his delight when he read the Herald's investigation into the amount of tax paid by 100 multinationals and their New Zealand subsidiaries.

The article revealed that despite 20 of them achieving sales from New Zealand customers to the value of more than $10 billion, they paid just $1.8 million in income tax after several claimed tens of millions of dollars in tax deferments and losses.

The tax gap between companies reporting meagre profits in New Zealand and claiming huge profits offshore has sparked outrage, and Labour and the Greens have demanded the Government follow Australia and the UK and crack down on profit-shifting.

The companies have gone all doe-eyed on it and protested they have done nothing wrong.

They claim they follow New Zealand laws to the letter and that any differences in the profitability of their New Zealand operations and in other parts of the world was down to different business models.

That may be true but had the subsidiaries here reported profits at the same healthy rate as their parent companies, the tax take for us would have been $490m.

As Green MP James Shaw put it, that would have paid for a hell of a lot of hip operations.

This is not a new problem and every country struggles to get tax out of wealthy companies and individuals. In the US, 27 companies on the S&P 500 paid no income tax this year despite reporting pre-tax profits.

According to USA Today, there are several reasons for this: years of losses can affect a company's tax bill, they can set up complicated company structures, and they can shift their headquarters to another country to take advantage of lower tax rates - something presidential hopeful Hillary Clinton has promised to crack down on.

And it's not just companies that try to minimise their tax. In 2013, Inland Revenue reported that 107 out of 161 "high-wealth individuals" who owned or controlled more than $50m in assets declared their personal income for the previous financial year to be less than $70,000 - the starting point for the top tax bracket of 33 cents in the dollar.

They managed to do that by employing a variety of 6800 tax-planning devices, such as companies, trusts and overseas bank accounts. One multi-millionaire had a network of 197 entities.

Despite Revenue Minister Michael Woodhouse's silence, this week it appears the Government is aware of the problem.

Last May, the IRD was allocated extra funding to go after multinationals and companies that turn over $30m or more, which the IRD considers capable of adopting aggressive tax planning.

They are also targeting high-end individuals and wealthy immigrants.

But if you don't want to wait for the IRD to do its job and claw back tax from multinationals, boycott those companies spending a fortune to avoid paying their fair share. Because what they're doing might be legal - but it's morally bankrupt.

Kerre McIvor is on NewstalkZB, weekdays, noon-4pm

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