13 Jul 2016

Uber's 'extremely elaborate' tax arrangements

6:14 pm on 13 July 2016

Uber used a complicated structure of international companies to reduce its New Zealand tax bill, accounts filed with Companies Office show.

Uber New Zealand Technologies paid $9397 in tax last year despite earning revenue of more than $1 million.

A mans hand holding a smartphone with the Uber app running

Uber is an app-based ride service, which operates around the world (file). Photo: Public domain

The company's annual report shows that in 2014 the alternative taxi business' costs totalled more more than $970,000, leaving it a pre-tax profit of $33,500.

Uber's expenses in this country include $231,000 on staff costs and more than $500,000 on mobile devices and fees.

A spokesperson for Uber New Zealand said the company complied with all its New Zealand tax obligations.

In the 12 months to the end of December 2014, Uber New Zealand earned $1,061,018 in revenue from its parent company based in the Netherlands.

That was a fee paid to it for marketing and support services.

'Extremely elaborate'

Auckland-based tax consultant Terry Baucher told Checkpoint with John Campbell Uber appeared to have fine-tuned the use of a system known as 'double-Dutch' accounting.

The method is commonly used by multinationals to minimise tax obligations, by moving money from high to low tax jurisdictions.

"Google, Facebook and now Uber, they all use this strategy. Uber it appears has fine-tuned it because the other companies had an Irish subsidiary involved in there but Uber seems to have found a way of not requiring that," Mr Baucher said.

The structure used by Uber was "extremely elaborate", and effectively involved booking income in the Netherlands through one company then shifting it to another Dutch company in Bermuda, Mr Baucher said.

The amount of revenue collected from fares in New Zealand was unknown. Uber drivers kept 80 percent of each fare and were responsible for paying their own income tax and GST.

The remaining 20 percent was collected by Uber BV in the Netherlands, which processed the credit card payments.

"Uber BV then pays a royalty to [another Uber entity], which is another Dutch company but headquartered in Bermuda. And ultimately that company then pays on a small royalty to its headquarters in San Francisco," Mr Baucher said.

Uber BV in the Netherlands then paid a marketing fee to its New Zealand business.

"That's how Uber New Zealand derives its income," Mr Baucher said.

An investigation by Fortune Magazine last year found this money merry-go-round resulted in Uber paying only about 1 percent tax.

The arrangement is not illegal but has attracted criticism in countries, such as in the United States, where multinational companies such as Google end up paying very little tax.

Uber NZ's tax and costs

Uber New Zealand Technologies incurred costs of $976,287, resulting in a pre-tax profit of $33,561.

While it paid $9397 in tax, based on the company tax rate of 28 percent, its total tax bill for 2014 was $33,910 due to deferred tax incurred in 2013, its first year of operation in New Zealand.

Costs for 2014 included $231,302 on payroll, $358,216 on mobile devices and $188,885 on mobile fees.

While Uber New Zealand Technologies received $1.06m in revenue last year from its Dutch parent, it owes $1.1m to three Dutch-based Uber companies.

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