Facebook millions leave NZ for lower-tax Ireland

Company’s Kiwi revenue stays flat at $9m as $157m goes to sister operation

Facebook NZ has reported its profit jumped by a third for the 12 months to December 31, albeit in the context of reported revenue again dwarfed by payments to a sister company in lower-tax Ireland.

The firm is part of the Mark Zuckerberg-founded Meta, which also owns Instagram and WhatsApp, among other properties.

Facebook NZ booked total comprehensive income after tax of $3.1m, up from $2.8m in 2022.

Revenue edged up to $9.1m from the previous year’s $8.7m. Payments to Meta Platforms Ireland for purchases of services rose 5 per cent to $157.4m from $149m in 2022.

Multiple tech multinationals have subsidiaries in Ireland, which has a 12.5 per cent corporate tax rate for trading income.

A note with Facebook NZ’s accounts said its gross amounts from advertising and services were $163.5m from $154.2m in 2022.

Income tax expense was $1.3m versus $1m in 2022.

In June 2019, then finance minister Grant Robertson and then revenue minister Stuart Nash proposed a digital services tax (DST) — a flat 2 or 3 per cent levy on a tech multinational’s New Zealand revenue.

However, the idea sidelined in favour of waiting for a long-in-gestation OECDwide measure — until it was eventually revived in August 2023 with the introduction of the DST bill for a 3 per cent tax on Big Tech firms’ New Zealand revenue.

The bill was introduced before Parliament rose for the 2023 election, and never made it to its first reading.

Then National technology spokeswoman (and now Technology Minister) Judith Collins told the Herald she would not have supported the bill.

If the measure had passed, it was expected to raise around $90m a year.

But Mfat officials warned New Zealand could face close to $100m in retaliatory tariffs.

NZ-based “software-as-a-service” (or “SaaS”) companies such as Xero could face a crackdown in offshore markets.

The officials recommended that New Zealand give OECD “beps” (base erosion and profit-shifting) talks (which began in 2016) more time.

Don Christie, cofounder of NZRise, which represents local IT services firms, said the amount generated by the DST would have been a “drop in the ocean”.

Christie said the Crown already had the tools to level the playing field. It just needed to lift its game enforcing current tax and content laws — and procure more services from locals.

Despite Collins being cool on a DST, Meta and its peers face a potential landscape shift with the Fair Digital News Bargaining Bill (introduced by the previous Government) still in play.

A select committee is due to report on the legislation shortly. New Media and Communications Minister Paul Goldsmith told the Herald he was getting advice on the bill.

He said one limitation was its failure to deal with AI’s use of news content.

Facebook NZ did not detail staff numbers in its financials.

Facebook Australia — which also filed results this week — said its local headcount had fallen by 16 per cent from 156 to 131.

Globally, the firm laid off about 20,000 people over 2023, or roughly one in five of its workforce.

Analysts said the move was partly associated with over-hiring during the pandemic, and partly related to a shift in focus from the virtual reality

The social network’s Australian operation sent A$1.14 billion ($1.25b) offshore — A$100m more than 2022 — mostly to Meta’s subsidiary in Ireland as its reported revenue fell to A$209.0m from A$224.6m in 2022. After-tax profit was A$47.1m from A$34.7m in 2022.

Worldwide, Meta made a net profit of US$39.1b for 2023 from US$23.2b in 2022 or revenue of US$134.9b versus 2022’s US$116.6b.

A strong start to 2024 meant the firm paid its first ever dividend in the first quarter — good news for the NZ Super Fund which, despite participating in an unsuccessful Christchurch Call-related campaign to change Meta governance, maintains a sizeable stake in the firm (worth $330m at its most recent disclosure).

Collins and Revenue Minister Simon Watts have been approached for comment on Facebook NZ’s results, and any measures in the works regarding multinationals’ financial reporting.

Meta has been approached for comment.