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Speaker 1: The issue of big tech companies like Meta and Google

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Speaker 1: and Amazon not paying their fair share has come to

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Speaker 1: light again. A new report points out that the bloodline

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Speaker 1: of New Zealand subsidiaries making large payments to offshore affiliates

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Speaker 1: labeled as service fees as a bit of a rought,

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Speaker 1: withholding tax of just five percent, could bring an extra

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Speaker 1: one hundred and thirty million dollars in revenue to the

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Speaker 1: country if we did that. And Jeff Nightingale is an

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Speaker 1: independent tax expert and joins it now I'm morning to.

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Speaker 2: You, Jeff, Good morning Andrew.

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Speaker 1: My question has always been how did we let big

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Speaker 1: tech get away without paying tax in the first place.

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Speaker 1: I mean, you know, they're not breaking the law, they're

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Speaker 1: just following the code we set them.

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Speaker 2: Yeah, that's that's right. So that's a very important point.

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Speaker 2: They're not breaking them all. But the question that the

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Speaker 2: report raises is the law currently correct and does that

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Speaker 2: result in the correct results for the New Zealand economy.

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Speaker 2: And the tax is pretty low, But the problem is

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Speaker 2: is that they the big tech companies, they're using a

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Speaker 2: tax system, an international tax system that has been designed

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Speaker 2: over the last hundred years, over one hundred years ago

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Speaker 2: that deals with sort of exports of goods and manufactured

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Speaker 2: goods and things, and doesn't really cope with what I

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Speaker 2: call digital weightless services. And so that's really the problem,

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Speaker 2: and that's given quite low levels of tax compared to

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Speaker 2: their turnover.

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Speaker 1: Are these service fees I mentioned dodgy.

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Speaker 2: No, they're not dodgy. They are the way that the

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Speaker 2: intellectual property is valued and paid for under our arms

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Speaker 2: length alls. So we have all these rules that say,

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Speaker 2: if you're trading with yourself across international borders, you've got

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Speaker 2: to do it on an arms links basis. And that's

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Speaker 2: the result they're giving. And the question the report's raising

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Speaker 2: and saying is that the right result? And there are

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Speaker 2: more complexions to it. Even if we could tax them more,

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Speaker 2: there's a real issue about whether we should tax them more.

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Speaker 1: It's another report that points out the problem very very well,

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Speaker 1: but does it offer any answers and are there any answers?

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Speaker 2: Well, there are answers the report suggests withholding tax. But

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Speaker 2: there's two risks with that approach. The first is that

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Speaker 2: we have in power in the US the Trump administration,

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Speaker 2: who has proven one hundred percent that they will retaliate

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Speaker 2: with tariffs on our export good. We already are being

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Speaker 2: hit with fifteen percent, but if we were to try

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Speaker 2: and tax the US digital giants more, it is highly

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Speaker 2: likely that we would get an increased tariff response. So

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Speaker 2: the question would be more taxes to New Zealand, but

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Speaker 2: higher tariffs on our exports. What's the right answer. That's

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Speaker 2: the first problem. The second problem is it's not clear

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Speaker 2: whilst you might collect the tax off the multinationals, they're

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Speaker 2: likely to pass it on to New Zealand businesses and

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Speaker 2: eventually consumers. So the economic incidents, who pays the tax,

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Speaker 2: who bears the cost shifts through to the consumers, so

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Speaker 2: we don't actually get it off them anyway.

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Speaker 1: It's a fine pickle and thank you so much for

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Speaker 1: your time. Jeff Nightingale, independent tax expert.

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Speaker 2: For more Familily edition with Ryan on Bridge, listen live

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