The big technology story in New Zealand this weekend is about Apple’s tax bill. Or rather, the lack thereof.
The electronics giant sold $4.2 billion (NZD) worth of products in New Zealand, but it didn’t pay any local tax at all. That’s according to a Saturday report from the New Zealand Herald. Apple did pay $37 million in income tax based on its New Zealand sales, but it paid that money to the Australian government, since that’s where the New Zealand operation is run from.
The arrangement to send the tax on New Zealand profits to Australia has been in place since at least 2007. Experts confirmed the arrangement is legal under New Zealand law.
“They’re operating completely legally,” said Deborah Russell, a university lecturer who was recently selected to be a candidate in the New Zealand Labour Party. “It’s just that age-old distinction between legality and morality.”
John Payne, a spokesman for a New Zealand business lobby called the Corporate Taxpayers Group, said the same tax techniques used by Apple are used by local exporters.
“It’s Tax 101 in terms of activity,” Payne told the newspaper. “And it’s quid pro quo for us when we’re operating similarly in another country.”
The Herald calculated that, if Apple had “reported the same healthy profit margin in New Zealand as it did for its operations globally,” it would have paid $356 million NZD in taxes.
“Apple aims to be a force for good, and we’re proud of the contributions we’ve made in New Zealand over the past decade,” an Apple Australia representative told the newspaper. “Because our products and services are created, designed, and engineered in the US, that’s where the vast majority of our tax is paid.”
In an accompanying editorial, the Herald acknowledged that, since Apple’s production, design, and research all take place far away, “it is understandable that our slice” of tax revenue “may be small.”
“But, in fairness, it must be more than zero,” the Herald continued, “The amount we reveal today that Apple has been shown to pay to Inland Revenue in income tax.”
“I really like Apple products—they’re incredibly innovative—but it looks like their tax department is even more innovative than their product designers,” said James Shaw, one of the leaders of New Zealand’s Green Party.
Apple’s payments of international taxes has come under scrutiny in a variety of countries in recent years. One US advocacy group estimated the company would have owned $59 billion in US taxes but for profits that were stashed in Irish subsidiaries.
In August, European competition chief Margrethe Vestager said that the sweetheart deal Apple got from Ireland constituted illegal state aid to a corporation and that Apple should be compelled to pay €13 billion ($14.5 billion) in back taxes.