Taxing revenue will help avoid tech tax evasion

There's been some controversy over the tax paid in New Zealand by multinational companies, particularly those in the tech sector.
Written by Darren Greenwood, Contributor

Google, Facebook, and Starbucks have been paying next to nothing in tax, despite earning millions from their operations in New Zealand.

The situation is reflected overseas, where in Britain, for example, a cash-strapped government is most unhappy, calling the low taxes paid by such companies "immoral" and "outrageous."

The New Zealand Labour Party is also demanding a clamp-down on what it sees as tax evasion. It noted that Australia is developing policies to combat this problem, too.

However, as tax experts point out, making such technology businesses pay their "fair share" is not so easy.

Taxes are paid on profit, not revenue. Companies can shift around their charges, revenues and royalty payments, so that the "profits" are made in low-tax environments. Alternatively, businesses are taxed where they have their physical headquarters, with tax based on worldwide income.

For an internet-based business, conducting operations in cyberspace, pinning something down to a physical property is that much harder, and certainly it is harder to tax online revenues than physical labour and wages.

I guess there will be no option but for governments to levy some kind of revenue-based tax, and certainly there will need to be some coordination between governments to help make it happen. Such taxes will have to be kept low, as I am sure the corporates will find a way of passing the tax burden on somehow.

Governments have also created the complicated tax structures that allowed such loopholes to develop. They might do better, revenue wise, to keep taxes low and simple.

As for the technology businesses, they can only be commended for their efforts to minimise their tax bill. All businesses must do this, for the maximum benefit of their business, to fund greater investment and innovation.

I am sure those in the tech sector knows how to spend their money far better than any politician. This will keep government on its toes, and encourage it to spend its tax revenues wisely.

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