Big Tech and Multinationals

What problem are we trying to fix?

Big tech companies and other large multinational corporations are making billions of dollars in Aotearoa New Zealand (NZ) and shifting their profits offshore to minimise the tax they pay here. This means we’re missing out on $100s millions in tax revenue that could pay for the things that help everyone to live good lives, like schools and public housing.

They do this through accounting tricks, like reclassifying most of their super profits as “service fees” that don’t get taxed. For example, in 2024 Google earned about $1.139bn but paid “service fees” of $1.052bn to a Singapore subsidiary, leaving just over $29m of taxable profits here - that means less than 3% of the profits they make in NZ are being taxed!

They are making these massive profits using our infrastructure, workers educated in our schools and cared for by our hospitals but are not paying their fair share to maintain these collective resources. Meanwhile local small and medium businesses that pay their taxes are struggling to compete.

How could we tax these multinational corporations better?

A 5% withholding tax can be enforced against the vast “service fees” that these corporations send overseas. These “service fees” are actually royalties paid for the use of intellectual property. Under existing laws and double taxation treaties withholding taxes must be paid on these royalties.

We can also increase transparency around profits made in NZ by introducing country-by-country reporting and amending the Companies Act to require all local subsidiaries of overseas-headquartered companies to file accounts publicly, so we know how much profit they’re making in NZ and can make sure they pay their fair share of tax here.

Why would this be better?

In the wake of the Trump administration’s trade retaliation against taxes on US tech companies our government dropped our planned Digital Services Tax, so using existing laws that are not targeted to big tech is a practical way to get around this issue.

Ultimately, international cooperation on taxing multinationals would be most effective, but such efforts through the OECD to establish a global minimum corporate tax rate and through negotiations towards a UN Tax Convention are slow moving and face many barriers. 

Enforcing existing tax obligations and increasing transparency requirements for multinationals are steps we can take right now to make big tech and other large multinationals pay their fair share.

This approach could raise $100s millions in additional revenue to fund school lunches for our kids, hospital beds for those needing elective surgeries and social housing units for whānau on the housing waitlist.