APN are corporate tax hypocrites, will Labour stop feeding them stories now?

APN/The Herald have an article covering that Apple NZ paid 0.4% tax on TURNOVER of $541 million – a story pushed by Labour and David Cunliffe.

Apple’s New Zealand division made sales of $571 million last year but paid only 0.4 per cent of that in tax.

Labour’s Revenue spokesman David Cunliffe said that’s akin to paying nothing at all, and letting a corporation get off “scott free” is something New Zealand taxpayers shouldn’t have to stomach.

Apple’s New Zealand sales topped the half billion dollar mark in 2012 after rising to $414 million in 2011, according to its financial results for the 12 months ended September 29. Apple is the world’s biggest tech company and makes iPads and iPhones.

Its local unit recorded a tax paid profit of $5.5 million in the year, down 40 per cent from its 2011 earnings. Income tax fell to $2.5 million, amounting to 31 per cent of pretax earnings, from $5.1 million a year earlier.

Nowhere in the story does it state want percentage of profit was paid in tax. The story seems to be pushing emotion while being light on facts and data.

But since APN think tax should be paid on turnover I thought I’d check what they paid. After all if you are going to point the finger at other corporates you had better be a corporate citizen than they are.¬†

APN’s financial accounts are online. They helpfully¬†separate¬†out their New Zealand operations at a high level.¬†Total revenue¬†was $287m, down 7%.

On Page 45 it shows their consolidated group turnover of $867 million for 2012. Tax paid on that?

Nothing, zip, zilch.

In fact they got a tax credit of over $68 million. And the year before they got another tax credit of  $48 million. On page 62 they list their tax exposure. They also note that they are in dispute with IRD:

The Company is involved in a dispute with the New Zealand Inland Revenue Department (‚ÄúIRD‚ÄĚ) regarding certain financing transactions. The Company is satisfied that its treatment of the financing transactions is consistent with all relevant legislation and¬†that no tax will become payable. The dispute involves tax of NZ$48 million for the period up to 31 December 2012. The IRD are¬†seeking to impose penalties of between 10% and 50% of the tax in dispute and interest in addition to the tax claimed. In the event the¬†Company is unsuccessful in the dispute the Company has tax losses available to offset any amount of tax payable to the extent of¬†NZ$32 million.

On 22 February 2013 the Adjudication Unit of the IRD advised that it agrees with the position taken by the IRD. Accordingly the Company will be issued shortly with Notices of Assessment denying deductions in relation to interest claimed on certain financing transactions. In response to this step the Company will commence litigation in the High Court of New Zealand to defend its position in  relation to this matter.

So IRD thinks they owe tax, they don;t think they do, but if they do have to pay it then they still don’t care because they have plenty of tax credits¬†available¬†to offset it. They are bleeding so much red ink that it is unlikely that APN will pay tax for the foreseeable future. They have $611 million of accumulated losses.

To be fair that is probably because they are a dying company in a dying industry and they are making losses year on year.

But it also means they should know, better than anyone, that a company does not and should not pay tax based on turnover.¬†APN, on the basis of their article about Apple should be paying tax, right now they aren’t paying anything. They are corporate hypocrites.

From¬†the¬†accounts, as a little aside at least we now know how much it cost to relaunch the tabloid form of the NZ Herald…$2,939,000!

Decent journalists, trained and skilled…. yeah right.

  • Butts_McButts

    I like how they quoted Silent T on a policy that Labour hasn’t even formulated yet. That’s some grade-a drip-feeding right there.

  • Orange

    mmmm, good article Whale

  • Mediaan

    This could explain why their main newspaper, the Herald, has been neglected and milked.

    Theory. They are going to build up a big tax loss in NZ, then, when the last reader gives up breathing or at any rate subscribing, and the last advertiser wises up to the fact that nobody reads it, they just sell the company (with its tax credits) to some other company with too much immediate income. Get a nice price.

    • Callum

      You do realise that tax losses are lost on change of business ownership over a certain level don’t you? So no you can’t sell tax losses.

      • Mediaan

        It surprises me that you could not transfer the company with its history of tax losses to another different owner, who retains those paper tax losses. Is that what you are saying? Because I thought I had read about this happening, quite a few times.
        Would you be able to sell the above to another company within your own same Group?

        • Callum

          Change of ownership above 33% (from memory here) results in the loss of losses carried forward. If you were in a proper tax group then the losses are already spread around that group. Selling bits off doesn’t help you. The only real way to do it is for the loss making company to buy a profit making company to offset dividends against historic losses, which can take a long time.

          • Mediaan

            I see, thanks Callum.

  • johnbronkhorst

    and dopey dave wants to be in govt.?? when he can’t tell the difference between turn over and profit…Using my trusty pocket calculator dave (no magic powers).
    0.4% of $541 million is $2 164 000 if this 28%(company tax rate) of their taxable PROFIT, their profit was about $7 728 571.40. simple really if you are not trying to deliberately defraud the NZ people by confusing ignorant people with the difference between turnover and profit.

    • johnbronkhorst

      Of course this is true if this number is ex GST. But the GST generated on this number is $81 150 000 in (to repeat goods and services T A X).
      If this is inc GST
      Therefore $470 434 780 + GST (GST $70 565 220)
      If tax of 0.4% ie $1 881 739,10
      Therefore profit (at tax rate of 28%) is $6 720 496.70

  • peterwn

    The editor could have at least checked with the accountant to see if there was a potential kettle/ pot situation.

  • Pete George

    An NBR article gives the details:

    Apple’s New Zealand sales topped the half-billion dollar mark in 2012
    after rising to $414 million in 2011, according to its financial results
    for the 12 months ended September 29.

    The local unit of the world’s biggest tech company recorded a tax-paid
    profit of $5.5 million in the year, down 40 percent from its 2011
    earnings. Income tax fell to $2.5 million, amounting to 31 percent of
    pre-tax earnings, from $5.1 million a year earlier.

    http://www.nbr.co.nz/article/apples-nz-unit-paid-tax-amounting-04-percent-its-half-billion-sales-2012-bd-137629

  • jonno1

    Actually the tax rate is stated, at 31% ($2.5m tax out of $8m profit before tax). What’s odd about that is that the NZ corporate tax rate is only 28%.

    The real question is why is a tech company making only 1.4% profit before tax? The answer (probably) is that the parent company charges substantial licence fees or suchlike, in order to transfer income to low-tax regimes. Like it or not, this is how the international tax system works.

    • Rockfield

      Somebody in the media should ask where Microsoftly NZ taxes are paid …. I think you will find that it is Singapore. I also believe that the Singapore government actually pays MS to setup their regional office there….
      R.

    • Callum

      Accounting profit and taxable profit are not the same thing in most cases, there will be non deductible/non taxable items that throw out your percentage.

      • jonno1

        Thanks Callum, I should have known that! In my little business, entertainment expense is the only (50%) non-deductable expense.

  • Steve R

    Come on Cameron. What else would you really expect from the lefties.
    I for one am totally sick and tired of thier half truths and forgetfulness.
    Am I correct that apple products in New Zealand are handled by a company called renaissance
    In which case if that’s true just remember apple arnt well known for giving dealers large margins around the world.
    It’s a new world out there news paper/magazine /music are all industries that are in big trouble and without them imbacing and thinking ahead of the digital world they are doomed to failure

  • http://www.facebook.com/brendan.waugh.7 Brendan Waugh

    Sales of $571 million? does that include or exclude any GST? I presume though that they have tweaked their accounts by paying massive royalties or something similar for their US patents and so are just breaking even.

  • Patrick

    NZ Herald is playing to their gallery – will not be long before there are more pictures than words in the Herald so their readers can understand the content. – kind of like a comic. I suggest Mad Comic is the best fit for the Herald, it is sh1te.

  • Mr_Blobby

    And this is news How? The fact that big corporates don’t pay TAX in New Zealand is not new. What is news is that this Muppet has had a brain fart and just discovered that one company minimized the amount of TAX they pay.

  • Callum

    Sorry, but learn to read a set of financial statements before spouting off about tax credits.

    No fan of APN at all but you make yourself look VERY poorly informed. Based on the financial statements you linked they paid $20m in tax last year despite making losses.

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