Apple faces the day of reckoning on taxes

Multinational companies such as Apple may soon pay more tax in New Zealand.

Apple’s accounts over the past 10 years appear to show it earned $4.2 billion in revenue, attracting $37 million in tax paid by the Australian holding company in that country.

The arrangement is legal and in line with accepted New Zealand and international accounting practice.

Senior lecturer in tax and accounting at Massey, Dr Deborah Russell, said reforms proposed by Revenue Minister Judith Collins were on the right track

Russell said tax laws affecting multinationals hinged on whether companies had a direct management presence in New Zealand.

‘‘A New Zealander wanting to buy an Apple computer has to either do it online or through resellers like one of the technology stores so that means Apple doesn’t have a direct tax-paying presence here. It’s really clever.

‘‘Apple is making billions of profits worldwide and they’re using this manoeuvre worldwide, it’s not just New Zealand.’’

In her announcement Collins said the Government expected multinationals to pay tax based on their actual levels of economic activity in New Zealand.

An Inland Revenue briefing paper warns that while the majority of multinationals operating here are tax-compliant, a minority engage in aggressive tax practices that may increase if left unchecked.

Submissions on the consultation document on implementing an international convention are open until early April and ministers will consider final proposals later in the year.