Go gle

Finance and Expenditure Select Committee
Parliament
Wellington

New Zealand

8 February 2018

Dear Chairperson and Committee Members

Thank you for the opportunity to provide a written submission on the Taxation (Neutralising
Base Erosion and Profit Shifting) Bill 

Google provides some of the core digital technology that millions of New Zealanders rely on
for trusted information and entertainment, to complete journeys or in the case of small
business owners, to create successful companies that can compete globally. Our mission is

to organise the world?s information and make it universally accessible and useful.

Google has a small presence in New Zealand with a team of around 30 employees. The
majority are Auckland based staff providing support for Google?s advertising customers.
Because of our small footprint we rely on the assistance from the wider Google group to

provide services to New Zealanders. Google is part of the Alphabet group of businesses.

We are aware of the discussions about corporate taxation in the digital age both globally and
in New Zealand. Google is one of the world?s biggest taxpayers, and in accordance with the
international tax regime the majority of our tax is paid in the United States where we are
headquartered. In 2016 we paid billion in corporate income tax globally.

Noting the desire of seeing New Zealand-sourced income booked locally, we are pleased to
advise the Committee that Google intends to shift to a new operating model in New Zealand.

This will increase transparency on the revenue generated by our business in New Zealand.

New Zealand is an important country for Google. We work closely with local businesses and

communities to help them make the most of our tools:

0 Search: New Zealanders make more than 10 billion searches on Google every year,

which is estimated to save them over 30 minutes a day.1

0 Maps: 3.5 million people use Google Maps every year. Improved navigation using
Google Maps reduces driving time on average by about 8% in Auckland, and 6% in

Wellington and Christchurch.2

9 YouTube: 2.5 million people use YouTube each year. On average, people who used
YouTube reported that they would rather have access to YouTube than receive more

than in annual discount on their Internet bills.3

In addition to our free tools, we offer advertising on Search and YouTube. Local businesses
find potential customers by marketing their products and services on these platforms - for
example, using Google AdWords on Search. By providing a range of affordable advertising
channels, Google has essentially created a new option of accessible advertising that lets

local businesses attract customers not only in their own city or country but all over the world.

New Zealand is also a good place to test new technology and as a consequence we held our
global launch of Project Loon in Christchurch.4 These atmospheric balloons were recently

used in Peru to help provide internet to communities in the aftermath of severe flooding.

Further information and data about Google?s Social and Economic Impact in New Zealand is

available at 

 

1 Google Social and Economic Impact in New Zealand, Alphabeta 2017,
p19.

2 Ibid, p41.

3 lbid, p44.

4 Project Loon was part of Google at the time of launch but is now a division of a separate
research and development business owned by Google's parent company Alphabet.

Taxation (Neutralising Base Erosion and Pro?t Shifting) Bill

Traditionally, corporate tax is paid in the country where a business?s products are developed,
their investment is made and intellectual property is held. There are strict laws governing
corporate taxation globally, and although we recognise the system is complex and
governments often use tax laws to compete forjobs and investment, companies are required

to operate within these laws.

This Bill will change how overseas companies operate in New Zealand in respect of whether
they have a permanent establishment and it sends a clear signal to the corporate community

that it expects a change in behaviour.

Our shift to reseller operations

In the past, when a customer bought advertising from Google, our Asia Pacific headquarters
in Singapore entered into a contract with that customer, and earned revenue from that
contract in Singapore - while Google NZ received an arm?s length remuneration for the

services it performed.

We intend to shift our business model from this past approach, such that customers will
enter into contracts with our New Zealand entity, which will generate revenue from NZ

advertising customers, and pay taxes in line with its role in the transaction.

Google at its core is a technology company, helping millions of people and small businesses
get more from the internet. Our revenue helps pay for our investment in this technology. We
employ tens of thousands of the smartest computer scientists in the world, including many
New Zealanders, and spend $14 billion US dollars a year on research and development,
funding new technology that we hope will make people?s lives easier and the world a better
place. In New Zealand, we hope that tools such as Search, Maps and YouTube continue to

provide a positive social and economic benefit to all communities.

Yours sincerely

Ross Young .
Senior Manager Matty
Public Policy and Government Affairs

Google New Zealand