Facebook victory for taxpayers

Facebook says it will book the revenues it earns from selling advertising to Kiwi companies in New Zealand in future.

The move may mean the United States technology giant pays more tax here.

Facebook is believed to earn tens of millions of dollars from New Zealand firms that buy advertising on its popular social media platform, but has previously invoiced them from Ireland, which has a company tax rate of 12.5 per cent and has allowed tax loopholes.

A Facebook spokeswoman confirmed Facebook New Zealand would book revenue from sales made to New Zealand advertisers.

Facebook had no timings as yet on when that would be, she said.

The change is part of worldwide move by Facebook to restructure its accounting.

It appears to be a major victory for policymakers concerned about the way Facebook and many other tech multinational companies have structured their affairs to minimise tax.

In 2014, the Labour Party’s then associate finance spokesman, David Clark, turned heads by suggesting a future Labour government might try to shut Facebook down in New Zealand because of the low amount of tax it paid here, before downplaying that threat.

The last publically-available accounts filed by Facebook NZ showed it paid $43,261 in tax in 2014 on the $1.2 million of revenue it received from Facebook Ireland in return for the services it provided the firm.

The switch to booking revenues locally should greatly boost Facebook NZ’s pre-tax income.

Google, which is understood to book the bulk of its New Zealand sales through Singapore, would not say whether it was considering a similar change.

Google spokesman Nic Hopkins said the company complied with the law.

Microsoft, which also books the bulk of its New Zealand sales overseas, did not believe it would be able to comment on the issue before Monday.

Facebook chief financial officer Dave Wehner wrote in a blog post on Tuesday that the global change would ‘‘provide more transparency to governments and policymakers around the world who have called for greater visibility over the revenue associated with locally supported sales in their countries’’.

Facebook would move to a local selling structure ‘‘in countries where we have an office to support sales to local advertisers’’, he said.

Facebook’s spokeswoman confirmed that included New Zealand.

‘‘In simple terms, this means that advertising revenue supported by our local teams will no longer be recorded by our international headquarters in Dublin, but will instead be recorded by our local company in that country,’’ Wehner said.

Wehner had appeared to indicate that there might be exceptions to the way the changes were applied, saying ‘‘each country is unique’’.

Dublin in Ireland would remain the base for Facebook’s international business, he said.