Microsoft NZ switches tax haven
Microsoft has switched between tax havens, transferring its New Zealand business ownership from Luxembourg to Bermuda.
Ironically, the company notified the Companies Office of the change on the same day that Revenue Minister Judith Collins was travelling to Paris to mark the Government’s support for an Organisation for Economic Cooperation and Development (OECD) clampdown on multinational tax rorts.
When Microsoft switched ownership of its New Zealand subsidiary from the US to Luxembourg in 2014, it said it was ‘‘entirely unrelated to tax issues’’.
But the software giant wouldn’t comment directly on whether it was a factor in the switch to Bermuda, saying in a written statement that the shareholding change was ‘‘simply part of standard corporate restructuring’’.
Inland Revenue spokesman Pete van Schaardenburg could not comment on the way Microsoft had structured its tax affairs.
But John Prebble QC, a law professor and tax expert at Victoria University, said the way multinationals structured their operations was ‘‘almost always’’ determined by tax considerations.
British charity Oxfam named Luxembourg and Bermuda among the ‘‘world’s 15 worst tax havens’’ in a report published last year.
OECD tax policy director Pascal Saint-Amans said in 2014 that Luxembourg was under ‘‘enormous pressure’’ to clamp down on harmful tax practices.
Prebble speculated Microsoft may have made the move to Bermuda because the Europe Union was ‘‘turning the heat up’’ on Luxembourg, Ireland and Holland, all of which he said had provided tax haven facilities.
In principle, the ownership of Microsoft NZ should not influence how much tax Microsoft paid in New Zealand, he said. ‘‘All Microsoft NZ’s income is taxed in New Zealand.’’
But it could influence how much tax Microsoft paid overseas on revenue streams such as royalty payments that the local subsidiary paid to the company, he believed.
Microsoft NZ pays more tax here than some of its peers.
It reported a profit of $12 million for the year ending June 2016, after paying a $6m tax bill.
Rival Google NZ paid $305,000 in tax in the year to December 31, after claiming a $604,000 loss on its operations.
Apple’s New Zealand business is understood to pay all its tax – $3m last year – to the Australian Tax Office, despite employing a few dozen staff here.
Collins said the agreement she signed in Paris on Wednesday meant Inland Revenue would receive more information from the US Internal Revenue Service (IRS) about US multinationals operating in New Zealand.
‘‘This will further enhance Inland Revenue’s risk assessment processes to make sure that the right amount of tax is being paid.’’
Inland Revenue will reciprocate by sharing information on New Zealand-based multinationals with the IRS.
Inland Revenue officials estimated in March that multinational tax avoidance was costing about $300m annually.
Finance Minister Steven Joyce forecast in the Budget that proposed changes to interest charges, transferring pricing and tax residency ruled would cut that by at least $100m annually when fully implemented in 2019.
Both figures palecompared to the $2.4 trillion cash stockpile Fortune 500 companies are believed to have amassed in tax havens by basing activities in countries with weak tax laws.