Mike Hosking: The Government's 'Google tax' is a double-edged sword

The danger with targeting big companies like Google is that they'll take their business somewhere else.

For a Government that's been spinning its wheels, talking a lot and doing not much, they can at last be acknowledged for getting a potentially significant piece of legislation into the House, and towards what many will hope is a kind of fiscal resolution.

Officially, it is called the "Taxation Neutralising Base Erosion and Profit Shifting Bill". In other words: the Google tax.

Big companies, it has been decided, don't pay enough tax here and we need to do something about it. This bill is your answer, and that is where we strike our first hurdle. It might be the answer - but equally it might not.

The problem is, of course, the so-called lack of tax that is paid here is not illegal. It's not like we're chasing crooks' companies who operate anywhere they want.

They operate in places where tax is low, and tax is low in a lot of places, and that's not illegal either. Countries can set any sort of tax rate they like.

Ireland became famous for its low corporate rate designed specifically to attract big names to their place to open shop, employ locals and pump money into the economy. That's before we get to the so-called tax havens: also perfectly legal, but increasingly judged with opprobrium.

In fact, the EU issued a list last week in an attempt into some sort of crackdown. But back to us. So if head office is in a low tax jurisdiction, and NZ is merely an outpost, then you can easily see that the tax doesn't get paid here.

Australia has passed law looking to do the same thing we are but just on Friday, we had the news that Exxon Mobil reported $6.7 billion in income, but also loss of taxable income so paid no tax. Chevron reported $2.1 billion in income, paid no tax. Shell reported $4.2 billion in income, paid no tax.

So we might like to look at whether a law is, in fact, any sort of answer at all.

Of course the real answer is global agreement on taxation, which is never going to happen. As a result, the individual countries are left to try and recoup what they can - and that's our next problem: we don't count.

Four and a half million people at the bottom of the world is worth doing business in - if it's easy. If it's not easy, the red flags start flying, and companies that deal in billions, if not hundreds of billions, have better things to do with their time.

That's not to say we shouldn't give this a crack: business of all sorts has a moral obligation to be good corporate citizens. Part of the hope is this law will send that message and therefore it might get some traction. Fingers crossed.