Google New Zealand recognised more business locally in 2019, reflecting the global crackdown on the tax affairs of multinational software firms, but still paid more than half a billion dollars to related companies.
The local unit of the world’s dominant search engine operator reported a pre-tax profit of $10.6 million on revenue of $36.2 million in calendar 2019, compared to a pre-tax loss of $640,000 on revenue of $17.5 million a year earlier.
Google NZ says that it's the first full year operating under its new business model, and that it “worked constructively and collaboratively to ensure that we comply with New Zealand’s legislative requirements".
Facebook, Google and Microsoft are among multinationals that volunteered to recognise more revenue locally to avoid more onerous regulatory action as governments tired of their efforts to shift profits to low tax jurisdictions.
The NZ unit’s 2019 tax expense was $2.5 million for calendar 2019, although actual cash payments for income tax were about $595,000. In 2018, the company's tax expense was $398,000 and actual cash payments totalled $452,000.
While the locally-recognised revenue more than doubled from the prior year, Google NZ still appeared to book a substantial amount of its business overseas.
The Advertising Standards Authority’s annual turnover report showed digital-only advertising accounted for $1.08 billion, or 39 per cent, of total ad spending in 2019.
Google NZ’s advertising reseller revenue is through a service agreement with Google Asia Pacific, where the Kiwi unit resells and supports advertising on the global group’s platforms.
In 2019, it paid $511.4 million in service fees to related parties and received about $2.9 million of service income from other Google entities. In 2018, those services fees amounted to $84.9 million while service income was $13.6 million.
Google’s NZ employment costs rose to $12.3 million in 2019 from $10 million a year earlier, while its occupancy and utilities bill rose to $2.3 million from $1.7 million and its marketing spend almost doubled to $1.5 million.