1 00:00:00,480 --> 00:00:05,400 Speaker 1: Now Netflix. There are questions about the global streaming giant 2 00:00:05,400 --> 00:00:08,080 Speaker 1: and how much tax it is actually paying here in 3 00:00:08,119 --> 00:00:11,799 Speaker 1: New Zealand. We've got one point three million Netflix users 4 00:00:11,800 --> 00:00:14,480 Speaker 1: in New Zealand paying at least eighteen dollars fifty a 5 00:00:14,560 --> 00:00:18,120 Speaker 1: month each. The company apparently doesn't make the eleven million 6 00:00:18,400 --> 00:00:22,520 Speaker 1: revenue threshold to make finances public, which would indicate a 7 00:00:22,560 --> 00:00:25,439 Speaker 1: small tax bill. Edward Miller is a researcher at the 8 00:00:25,440 --> 00:00:28,360 Speaker 1: Center for International Corporate Tax Accountability. He's with me this 9 00:00:28,440 --> 00:00:29,080 Speaker 1: evening high. 10 00:00:29,000 --> 00:00:31,200 Speaker 2: Edward Childer, great to be with you. 11 00:00:31,560 --> 00:00:33,599 Speaker 1: So how much do they make here? Do we know? 12 00:00:35,280 --> 00:00:38,360 Speaker 2: No, we don't know that information. If you look at 13 00:00:38,640 --> 00:00:44,160 Speaker 2: what Netflix files in Australia, their filings say that they 14 00:00:44,240 --> 00:00:47,560 Speaker 2: earn a revenue of one point one five billion dollars 15 00:00:47,560 --> 00:00:50,919 Speaker 2: in Australia, but in New Zealand the revenue that they 16 00:00:50,960 --> 00:00:54,640 Speaker 2: earn here is less than eleven million dollars, which basically 17 00:00:54,760 --> 00:00:58,080 Speaker 2: means or appears to mean that the revenue is being 18 00:00:58,120 --> 00:01:01,120 Speaker 2: booked in another jurisdicod, not in New Zealand. 19 00:01:01,400 --> 00:01:03,040 Speaker 1: How do you do that? How do you book your 20 00:01:03,080 --> 00:01:04,679 Speaker 1: revenue elsewhere? Legally? 21 00:01:06,760 --> 00:01:09,920 Speaker 2: It's a great question and one that should be should 22 00:01:09,959 --> 00:01:12,280 Speaker 2: be sitting in front of the IRD because if they 23 00:01:12,319 --> 00:01:14,200 Speaker 2: can't do it in Australia, then why can they do 24 00:01:14,280 --> 00:01:18,119 Speaker 2: it here? The Australian Tax Office has had a more 25 00:01:18,280 --> 00:01:22,160 Speaker 2: muscular approach to investigating multinationals. So it might be that 26 00:01:22,560 --> 00:01:24,760 Speaker 2: Netflix feels that they can't get away with as much 27 00:01:24,840 --> 00:01:28,600 Speaker 2: in Australia as they can here under the IRD. But 28 00:01:29,440 --> 00:01:32,520 Speaker 2: if you're a Netflix user in New Zealand, you're paying 29 00:01:32,560 --> 00:01:34,720 Speaker 2: for a service that's being delivered in New Zealand. It's 30 00:01:34,760 --> 00:01:37,280 Speaker 2: being consumed in New Zealand. I think it's the fair 31 00:01:37,319 --> 00:01:40,680 Speaker 2: thing to be asking why is the revenue booked in 32 00:01:40,680 --> 00:01:42,240 Speaker 2: what appears to be another jurisdiction. 33 00:01:42,680 --> 00:01:45,760 Speaker 1: I've been this is authorities and other districtions like Europe. 34 00:01:46,080 --> 00:01:49,040 Speaker 1: They've been raiding Netflix offices in Paris and they've been 35 00:01:49,040 --> 00:01:51,920 Speaker 1: doing it in Amsterdam. What exactly are they investigating them 36 00:01:51,920 --> 00:01:52,400 Speaker 1: for there? 37 00:01:53,760 --> 00:01:57,920 Speaker 2: So that investigation they raided the Paris and Amsternam officers 38 00:01:58,000 --> 00:02:02,320 Speaker 2: because what happened in the French filings is that Netflix 39 00:02:02,880 --> 00:02:07,600 Speaker 2: revenue jumped from very little to a lot in subsequent years. 40 00:02:07,600 --> 00:02:13,160 Speaker 2: So they are investigating subsequent years of which in Netflix 41 00:02:13,360 --> 00:02:17,200 Speaker 2: appears to be booking revenue that had been earned in 42 00:02:17,360 --> 00:02:21,560 Speaker 2: France from French Netflix users in the Netherlands. And that's 43 00:02:21,639 --> 00:02:25,400 Speaker 2: my suspicion that what is happening in France is probably 44 00:02:25,480 --> 00:02:28,640 Speaker 2: very similar to what's happening here because the parent company 45 00:02:28,639 --> 00:02:31,880 Speaker 2: of the New Zealand Netflix subsidiary is the same company 46 00:02:32,000 --> 00:02:37,160 Speaker 2: Netflix International dB I see incorporated in the Netherlands. 47 00:02:37,600 --> 00:02:42,520 Speaker 1: Right, given that our government is looking at corporate tax 48 00:02:42,600 --> 00:02:45,160 Speaker 1: rate here in New Zealand, and particularly as it relates 49 00:02:45,200 --> 00:02:47,440 Speaker 1: to multinationals, trying to get them to come here, et cetera, 50 00:02:48,080 --> 00:02:50,400 Speaker 1: is this related to that? I mean, is this something 51 00:02:50,400 --> 00:02:53,959 Speaker 1: that we should be potentially looking at alongside a change 52 00:02:53,960 --> 00:02:54,720 Speaker 1: to our corporate tax? 53 00:02:54,840 --> 00:02:57,760 Speaker 2: Right? I think it's a great wake up, Paul Ryan 54 00:02:57,800 --> 00:03:00,280 Speaker 2: for us to start thinking about what the relationship are 55 00:03:00,280 --> 00:03:03,919 Speaker 2: about services being delivered in New Zealand, about revenue being 56 00:03:03,919 --> 00:03:06,919 Speaker 2: booked in New Zealand or otherwise, about whether we can 57 00:03:07,000 --> 00:03:10,240 Speaker 2: tax that revenue, whether it's being derived from New Zealand 58 00:03:10,639 --> 00:03:13,320 Speaker 2: or otherwise. I don't think we have enough information to 59 00:03:13,320 --> 00:03:15,359 Speaker 2: be able to make a clear call that we can 60 00:03:15,600 --> 00:03:18,679 Speaker 2: confidently say that we can cut the corporate tax right, 61 00:03:18,960 --> 00:03:23,960 Speaker 2: because it appears that foreign multinationals have lots of tools 62 00:03:23,960 --> 00:03:26,760 Speaker 2: at their disposal to be able to shift profits that 63 00:03:26,840 --> 00:03:29,680 Speaker 2: are earned in New Zealand to other jurisdictions where they 64 00:03:29,720 --> 00:03:31,000 Speaker 2: are taxed at a lower rate. 65 00:03:32,639 --> 00:03:35,160 Speaker 1: How did you start Why did you start looking into 66 00:03:35,160 --> 00:03:38,200 Speaker 1: this to do with Netflix in particular and New Zealand. 67 00:03:38,280 --> 00:03:39,800 Speaker 1: What kind of got you into it? 68 00:03:40,880 --> 00:03:44,800 Speaker 2: I saw these stories coming out from France or from 69 00:03:44,840 --> 00:03:47,960 Speaker 2: at Front and Amsterdam, and I thought, that's interesting. I'm 70 00:03:48,000 --> 00:03:51,400 Speaker 2: just going to search in the company's register and see 71 00:03:51,480 --> 00:03:56,080 Speaker 2: what the ownership relations of the Netflix subsidiary here, and 72 00:03:56,240 --> 00:03:58,360 Speaker 2: that's when I saw that it was the exact same company, 73 00:03:58,400 --> 00:04:00,960 Speaker 2: and I thought, oh, there's a story here. I took 74 00:04:00,960 --> 00:04:03,800 Speaker 2: a look at the Australian filings because I could get those, 75 00:04:04,240 --> 00:04:05,760 Speaker 2: and I tried to take a look at the New 76 00:04:05,840 --> 00:04:09,160 Speaker 2: Zealand filings and they simply weren't there. And if you 77 00:04:09,240 --> 00:04:11,800 Speaker 2: sort of do some basic back of the envelope calculations, 78 00:04:11,840 --> 00:04:13,680 Speaker 2: you know you were talking about one point three million 79 00:04:13,680 --> 00:04:17,000 Speaker 2: subscribers paying eighteen fifty. I mean some of those will 80 00:04:17,040 --> 00:04:19,279 Speaker 2: be paying seven fifty because they're sort of the piggybacks 81 00:04:19,320 --> 00:04:22,479 Speaker 2: that cand use of subscribers. But any way, you slice 82 00:04:22,560 --> 00:04:24,600 Speaker 2: up the apple into the number of subscribers on the 83 00:04:24,640 --> 00:04:27,320 Speaker 2: amount they're paying. You're looking at hundreds of millions of 84 00:04:27,360 --> 00:04:30,479 Speaker 2: dollars of revenue that should be being booked in New Zealand, 85 00:04:30,520 --> 00:04:33,480 Speaker 2: which is definitely more than the eleven million dollar threshold 86 00:04:33,760 --> 00:04:36,760 Speaker 2: that fig and owned companies are required to report at. 87 00:04:36,880 --> 00:04:39,279 Speaker 2: So I started looking at that and then trying to 88 00:04:39,600 --> 00:04:41,960 Speaker 2: look at the Dutch filings and the British filings and 89 00:04:42,000 --> 00:04:45,120 Speaker 2: get a sense of what's happening in the company. I 90 00:04:45,120 --> 00:04:46,919 Speaker 2: don't have the sine of ad answers, but it seems 91 00:04:47,000 --> 00:04:51,120 Speaker 2: very clear that the revenue of Netflix subscribers that being 92 00:04:51,160 --> 00:04:53,720 Speaker 2: consumed here in New Zealand is not being booked here 93 00:04:53,760 --> 00:04:56,400 Speaker 2: in New Zealand, and I think that's a cause for concern. 94 00:04:56,640 --> 00:04:59,839 Speaker 2: And as you say, in terms of the international investment position, 95 00:05:00,880 --> 00:05:03,960 Speaker 2: it seems that there's no clear relationship that exists around 96 00:05:03,960 --> 00:05:06,760 Speaker 2: the economic activity that's taking place here and the tax 97 00:05:06,839 --> 00:05:09,480 Speaker 2: revenue that's being booked here, and that we need to 98 00:05:09,560 --> 00:05:12,680 Speaker 2: zoom out us some more questions and start to think 99 00:05:12,680 --> 00:05:15,520 Speaker 2: about whether we need more transparency about these things before 100 00:05:15,680 --> 00:05:17,080 Speaker 2: we go and cut the corporate taxer. 101 00:05:17,720 --> 00:05:19,560 Speaker 1: Ed would thank you very much for that. Edward Miller, 102 00:05:19,920 --> 00:05:22,599 Speaker 1: who's a research at the Center for International Corporate Tax 103 00:05:22,600 --> 00:05:25,440 Speaker 1: and Accountability Research. Who's had a look at a little 104 00:05:25,480 --> 00:05:27,760 Speaker 1: look into Netflix. I mean, obviously you don't really know, 105 00:05:27,920 --> 00:05:30,240 Speaker 1: and what you don't know, what you don't know? Right, 106 00:05:30,760 --> 00:05:35,000 Speaker 1: but less than an eleven million dollars in revenue. No 107 00:05:35,000 --> 00:05:36,120 Speaker 1: one's buying that, are they? 108 00:05:36,880 --> 00:05:40,040 Speaker 2: For More from Hither Duplessy Alan Drive. Listen live to 109 00:05:40,160 --> 00:05:40,679 Speaker 2: news talks. 110 00:05:40,720 --> 00:05:43,920 Speaker 1: It'd be from four pm weekdays, or follow the podcast 111 00:05:44,000 --> 00:05:45,000 Speaker 1: on iHeartRadio.