It’s hard not to sympathise with David Clark. The Labour spokesperson for revenue wants Facebook to pay its fair share of tax in New Zealand.
Clark suggested banning or filtering the online giant could be one way of forcing Facebook to pay up.
Finance minister Bill English was quick to ridicule the idea. He describes a ban as “nuts”.
However, English shares Clark’s concern that Facebook doesn’t pay enough tax on the income it receives from New Zealand.
For the record the online giant paid just $28,000 in tax during 2012 on revenues of $790,000.
The world is waking up to the problem of large online corporations like Facebook avoiding local taxes in countries where they make money.
Google is famous for billing New Zealand advertising sales in low-tax Ireland and pushing the money through a string of countries in an arrangement known as the “double Irish Dutch sandwich”.
Other online companies have similar complex arrangements to avoid taxes.
This doesn’t just deny governments tax revenue, it also puts native companies in countries like New Zealand, Australia and the UK at a severe disadvantage when it comes to competing with rivals who have far lower tax overheads. This is potentially a bigger threat.
Realistically the only way this problem can be dealt with is at the global level. Even that will be difficult – the countries that win from these tax arrangements are in no hurry to stop whatever benefits they gain.