Unions accuse Uber NZ of avoiding $13m in tax

Author
Chris Keall, NZ Herald,
Publish Date
Thu, 18 Nov 2021, 1:53PM
(Photo / Getty)
(Photo / Getty)

Unions accuse Uber NZ of avoiding $13m in tax

Author
Chris Keall, NZ Herald,
Publish Date
Thu, 18 Nov 2021, 1:53PM

Unions say research indicates Uber avoided between $6.4 million and $12.8m in corporate tax in New Zealand for 2020. 

The research, carried out by the Centre for International Corporate Tax Accountability (Cictar) and Research, was published this morning by First Union and E tū, who are in the midst of a legal brawl with the US-based rideshare giant. 

Mirroring a running series of legal battles around the world, the pair are seeking a declaration from the Employment Court that Uber's workforce are employees rather than independent contractors. 

Its ongoing losses notwithstanding, Cictar alleges Uber has avoided "billions" in tax, in part by classifying its drivers as contractors, and in part by using a network of more than 50 shell companies based in low corporate tax locations including the Netherlands, Singapore, Bermuda and the US state of Delaware. 

The PSA supported the Cictar Research, accusing Uber of "tax theft" for not "not paying its share,' as the public service union sees it. 

Uber NZ is owned by Amsterdam-based Uber International Holding BV, according to Companies Office records. 

"New Zealanders should be concerned about how multinationals like Uber, that rely so heavily on investments in public infrastructure like roads and hospitals, are blatantly shirking their tax obligations," said Cictar principal analyst Jason Ward. 

"Uber's estimated tax gap of $6.4m to $12.8m in 2020 is money that could have been spent staffing hospital wards or training apprentices. Instead, it was squirrelled away in Uber's billion-dollar Dutch tax shelter, which if unchallenged will allow the company to avoid billions in corporate tax as its operations continue to expand." 

An Uber spokesperson responded: "The Uber platform offers flexible earning opportunities for tens of thousands of Kiwis, with the vast majority of partner earnings staying in the local economy." 

Being classed as self-employed, Uber's 6000 or so contract drivers pay tax individually. 

The contract driver setup also provided rivals, such as Ola, a ready-made workforce when they launched in NZ, allowing them to establish themselves in the market more quickly. Many rideshare drivers now divide their time between Uber, Ola, locally owned Zoomy and other services. 

Uber also argues that its service helps to boost the overall economy. This morning, a spokesperson said that was especially true during the pandemic. 

"Recently, the Uber platform has also provided a crucial source of income for those unexpectedly out of work, such as those in the hospitality industry, the spokesperson said. 

Uber made its comments in a written statement. The company declined to answer follow-up questions. 

Uber's New Zealand operation reported service fee revenue of $3.8m in the 12 months to December 31, according to a Companies Office filing - a big drop on its pre-Covid revenue of $12.8m. 

Pre-tax profit for 2020 was $151,952, after-tax profit - which included a tax benefit of $199,802 - was $350,754. 

For 2019, Uber NZ had a pre-tax profit of $527,646 and made an after-tax profit of $222,303. 

A number of tech companies have similar arrangements. Microsoft New Zealand, for example, was owned by a Microsoft subsidiary in Bermuda until last year, when its shares were transferred to another Microsoft subsidiary, this time-based in Ireland. A second Microsoft NZ entity, setup in 2020 as Prime Minister Jacinda Ardern announced the company would build a series of giant data centres in northwest Auckland, is also owned by Microsoft Ireland. 

New Zealand's government has not pursued unilateral action along the lines of Australia's so-called "Google Tax" that penalises multinationals deemed to be profit-shifting. A flat "digital tax" on total revenue was discussed then shelved. 

Successive governments have said multilateral action is more likely to be effective, and in NZ became one of 130 countries to sign up for a minimum global corporate tax rate of at least 15 per cent. 

However, it is unclear how long it will take to implement the initiative. Critics say it could take years. 

There are other complications. Google NZ's 2019 filing, for example, proved that it had moved to invoicing its NZ revenue locally. But at the same time, in-house service fee payments from Google to its US parent ballooned from $85 million in 2018 to $511m in 2019. 

Google said the service fee was part of a "new model", and that its taxable NZ revenue was net of the service fee. The net result was little change to its NZ tax bill.