We need tax probe - NZ tech industry

Catalyst IT director Don Christie. Photo / Mark Mitchell

Representative of the local informational technology industry have come out in favour of an inquiry into the multinational company tax gap after revelations that firms collecting billions in revenue in New Zealand were paying virtually no income tax here.

NZRise co-chair Don Christie, also a director of IT firm Catalyst, said he and his counterparts in the New Zealand technology industry faced unfair competition from foreign-owned firms who were able to minimise tax bills by routing money offshore.

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Grpahic / NZ Herald

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"Don't get me wrong, as a businessman I don't really want to pay tax. But I recognise the value of it and it's just not a level playing field, and people just don't get that," he said.

"If you're a local business you're not just generating revenues locally, you're also staring your neighbour in the face. If you've got tax havens in Bermuda you're not buying into same societal contract."

Christie said government procurement decisions should take the tax paid by contractors into account, and cited economic research commissioned by Catalyst which a showed a third of spending on local suppliers was returned to government in taxes - including income, PAYE and GST - a contribution that was almost non-existent for wholly offshore firms.

The calls for an inquiry have come after the Herald revealed widespread profit-shifting, including naming 20 multinational companies who reported healthy profits offshore and collected $10b in revenue from kiwi consumers but only paid a total of $1.8m in annual income taxes.

This morning Labour Party finance spokesman Grant Robertson said questions needed to be asked and answered in a formal setting.

"Other countries such as the United Kingdom and Australia have held inquiries that have revealed highly dubious practices in some cases. New Zealand should do the same. The public must have confidence the tax system isn't being treated with contempt," he said.

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Green Party co-leader James Shaw added his voice to calls for a crackdown and said the issue had been brewing for some time and should have been addressed earlier.

"The Government will say they are working multilaterally with the OECD to address this tax rort, which is good, but the OECD has been trying to address this issue since 1979," he said.

"We can't afford to wait another year to close this massive multinational tax loophole."

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Former Minister of Revenue Peter Dunne said the Herald revelations were not surprising and the forces underlying them were becoming more visible and urgent to address.

"The [Herald findings] are consistent with the information that was starting to come to light towards the tail end of my own time as Minister of Revenue almost three years ago," he said.

Dunne said he supported an international approach to solutions with negotiations as part of free trade agreements pushing for businesses to pay their fair share of tax in each of the countries that they operate.

A spokeswoman for Finance Minister Bill English referred questions to Minister of Revenues Michael Woodhouse. His office is expected to address the mounting controversy this afternoon.