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Covid-19 finished what Uber started (Photo: Getty.)
Covid-19 finished what Uber started (Photo: Getty.)

BusinessJanuary 13, 2020

Uber is a case study in our complicity with tax avoidance

Covid-19 finished what Uber started (Photo: Getty.)
Covid-19 finished what Uber started (Photo: Getty.)

Uber’s habit of pushing tax rules to breaking point is the reason Terry Baucher refuses to use the ridesharing service. But price and convenience outweigh most people’s moral indignation, he writes. 

In the 2010s the true extent of aggressive tax planning practices by tech giants like Apple, Google and Facebook emerged. These behemoths simultaneously piled up billions of dollars in tax havens, embedded their products ever deeper into our lives and shattered parts of the non-digital economy. It was also during this period that we personally, together with governments of both hues, willingly – if not always knowingly – gave up our sovereignty and free agency to these giants.

Uber stands as a poster child for the tech industry’s aggressive, and at worst frankly immoral business activities. It’s also the exemplar of why we cooperated in that loss of control.

Like other tech companies Uber established a network of subsidiaries in tax havens as part of its tax planning. But as the decade wore on initiatives such as the OECD’s Base Erosion and Profit Shifting (BEPS) and exchange of information work started to undermine the effectiveness of Uber’s tax structure.

In early 2019 Uber decided to fine-tune its tax planning by moving a subsidiary previously located in Bermuda to the Netherlands. This was in part in preparation for its initial public offering, but also in response to European moves cracking down on aggressive tax planning involving tax havens. As a result of the move, Uber reportedly created a US$6.1 billion Dutch tax deduction which it will be able to offset against future profits. 

Uber’s transaction provoked questions in the Dutch parliament, prompting the state secretary of finance, Menno Snel (the equivalent of New Zealand’s revenue minister, Stuart Nash), to deny ever meeting any Uber representatives about the matter. Snel found out that Uber’s promises of jobs (it now has over a thousand employees in its Amsterdam office) come at a political cost.

Uber responded that it was “committed to openness and transparency with tax authorities around the world” and “faithful to both the letter and intent of the laws in the many jurisdictions where we operate. Uber’s comments echo those of so many tech companies when challenged about their tax planning.

It will be no surprise to readers of Super Pumped: The Battle for Uber that Uber’s tax planning pushes the rules to breaking point. It’s the primary reason I refuse to use Uber.

I’m not alone in my distaste for such tax practices. New Zealand’s 2019 Tax Working Group in its final report commented: “The group has received many submissions about international taxation and the tax practices of multinational companies and digital firms. It is clear from the submissions that many people feel a deep sense of unfairness about the way in which the tax system deals with these firms. This is a worrying phenomenon: perceptions of unfairness have the potential to erode public support for the tax system as a whole.”

Although it’s easy to point the finger at Uber’s behaviour, at the same time it also illustrates how, despite apparently widespread public disdain for the aggressive tax planning activities of the tech sector, people continue to use their services. 

For users the convenience and lower prices Uber offers outweigh any moral indignation about its tax and business practices. This is also true of other tech giants such as Apple, Amazon, Facebook and Google whose services and products are used by billions of people even as they facilitate live-streaming of mass-murder or pile up billions of dollars in tax havens. In effect, we love the sin but hate the sinner. 

Exactly how much these tax practices cost New Zealanders isn’t clear. There is little public information available about the scale of the tech companies’ activities in this country let alone details of how much income tax they pay. Google, which has recently adopted “country-by-country” reporting as a means of giving more transparency to its results, did file financial statements for the year ended 31 December 2018. These show its income tax liability for the year was $398,341. (Intriguingly, the financials show the GST payable as of 31 December 2018 was $6,252,847 and that it owed over $81 million to an unnamed related party. I’ll leave you to guess where that might be located.)

By contrast, the last filed financial statements for the New Zealand subsidiaries of Facebook and Uber were for the year ended 31 December 2014. They, along with Mastercard and Visa, take advantage of Companies Office reporting requirements which only require overseas-owned subsidiaries to file financial statements if either their assets exceed $20 million or their total revenue is more than $10 million. Under the business model these companies appear to be using, the New Zealand subsidiary is usually paid a fee for “marketing” services provided to its parents. Unsurprisingly, these fees appear to be below the threshold for reporting. 

The ability for the likes of Uber and Facebook to structure their affairs to minimise scrutiny is a direct result of a policy choice to put ease of business and lower compliance costs ahead of transparency. Apart from tax and a lack of transparency there are other downstream effects of that choice, namely a growing suspicion that New Zealand is a bit of an easy mark for money-launderers.

Even if the various OECD initiatives bear fruit and an international agreement is reached about the taxation of the digital economy, that will inevitably involve each government accepting a partial surrender of its sovereign taxing rights. This is particularly true of New Zealand because of our small size.

There’s a scene near the end of Danny Boyle’s Shallow Grave when Christopher Eccleston (an accountant) berates his flatmates Kerry Fox (New Zealand connection!) and Ewan McGregor (handsome journalist) for spending some of their ill-gotten gains. He warns them “That’s what you paid for it. We don’t know how much it cost.” 

Similarly, although we pay little or nothing for Facebook, Google, Uber, Netflix and their ilk, the full cost to our society of a lower corporate tax take, oligopolistic business practices, a hollowed-out local media, toxic social media and the rise of fake news is still not clear. 

Addressing the aggressive tax and oligopolistic practices of the tech companies requires addressing a complex set of linkages: Reversing the trend of the past 40 years towards looser regulation of businesses; determining an acceptable set of rules for international taxation which recognises the vast and relatively sudden economic changes brought by the arrival of the digital economy; and recognising our complicity in enabling this state of affairs. Over the coming decade who will demonstrate the courage to take on this challenge?

Keep going!
The twice-a-day habit can be hard on the planet. (Photo: Getty.)
The twice-a-day habit can be hard on the planet. (Photo: Getty.)

BusinessJanuary 10, 2020

Caring for the planet, and your teeth: Why bamboo toothbrushes are only the start

The twice-a-day habit can be hard on the planet. (Photo: Getty.)
The twice-a-day habit can be hard on the planet. (Photo: Getty.)

Sales of environmentally friendly dental care products are steadily on the rise, but as business editor Maria Slade finds it isn’t easy being green.

Sorry planet Earth I’ve tried, truly I have, but I just can’t do bamboo toothbrushes. The feel of the rough wooden handles in my mouth is like fingernails on a blackboard.

And yet I’m not happy about tossing out a non-renewable plastic implement once every couple of months, either. The website of UK bamboo toothbrush maker MyBambooBrush claims Britons use a whopping 192 million toothbrushes a year. Whatever the veracity of that statistic, it is fairly evident a shedload of petrochemical-based nylon goes into landfills annually as a result of the modern human’s dental hygiene habits.

How to care for your pearly whites without adding to this environmental burden is something more and more New Zealanders are thinking about. A recent poll by customer insights agency Perceptive found that a quarter of Kiwis are now using an eco-friendly toothbrush. That figure is even higher among people aged 18-24, and of those who have not yet gone down the natural route 82% would consider giving it a go.

But as with most environmental issues, being eco-friendly in your oral care presents a number of conundrums. There is currently no straightforward way of recycling toothbrushes and toothpaste tubes in New Zealand, and many natural toothpastes that are supposedly better for the planet are also fluoride-free, which the dentistry profession warns is a tooth decay epidemic waiting to happen.

The Perceptive omnibus survey of 1000 New Zealanders found that of those using an eco-friendly toothbrush 38% are opting for bamboo. The New Zealand Dental Association is fine with bamboo brushes, saying they clean your teeth as well as anything else. Yet as my own experience shows they aren’t for everyone and from an environmental point of view it still involves chucking something in the rubbish.

Ecostore offers a toothbrush and toothpaste tube recycling scheme. (Photo: Ecostore.)

Environmentally friendly cleaning and body products company Ecostore launched an oral care range in 2018. Its toothbrushes are made out of renewable castor oil-based nylon and can be sent back to Ecostore for recycling via its purpose-designed scheme. While overall the oral care category is flat, sales of the new range are growing steadily, the company says.

Ecostore R&D manager Huia Iti says it chose not to go down the bamboo route for several reasons. Firstly it prefers goods made from recyclable materials that remain in use rather than disposable items. Ecostore’s toothbrush handles are ground into chips and moulded into spanners which wholesale customers use to open its 20 litre bulk containers, for example. Secondly, bamboo toothbrushes still have a metal staple in the head holding the bristles in place, and that is going into landfill.

Toothbrushes and toothpaste tubes can’t be put into standard curbside recycling collections, and the Ecostore scheme relies on consumers proactively sending their used products back, Iti concedes. There is no perfect answer.

“You choose the best most sustainable option you’ve got and keep making improvements,” he says. “You can’t just sit back and wait until the perfect solution is there.”

New Zealanders haven’t embraced natural toothpastes at quite the same rate as they have environmentally kinder toothbrushes, but still the Perceptive survey shows 19% are using a ‘natural’ product and of those who don’t the vast majority would consider doing so.

There are a wide variety of products on the market, and one company offering a solution to the packaging dilemma is homegrown startup Pop Care. Its mint-sized Pop Tabs are chewed before the user brushes their teeth, and come in a single tin of 125.

While Pop Tabs contain fluoride, many natural dental care products including the Ecostore range do not. Ecostore wants to offer consumers choice, Iti says. “Based on our understanding and interpretation of the science, we have our doubts about fluoride itself and we’ve taken the precautionary approach and decided to avoid it.”

The company was forced to amend its claims about fluoride after a complaint to the Advertising Standards Authority soon after the launch of its range, however. Rival natural toothpaste maker Grin meanwhile allegedly ran foul of Massey University, with the two organisations disagreeing over use of university research commissioned and funded by the company

Grin Natural also makes a product containing fluoride. (Photo: Grin.)

New Zealand Dental Association president Katie Ayers says it’s not always made clear that products are fluoride-free, and dentists want to see better labelling so that consumers are aware they may be putting their oral health at risk. “We’re seeing some individuals who have previously had minimal tooth decay suddenly developing a lot of new cavities after they have changed to a fluoride-free ‘eco’ toothpaste, sometimes without realising that their new toothpaste was not effective,” she says.

The profession has no issue with products being plant-based or leaving out additives such as sodium laurel sulphate which makes the paste foam. The problem is the absence of fluoride. A recent analysis of studies into the effectiveness of toothpaste was pretty clear, she says. “It basically found if you haven’t got fluoride in your toothpaste you might as well not bother.”

The good news is some natural toothpaste products now do contain fluoride, such as Grin’s Natural Whitening and Colgate’s Nature’s Extracts. Colgate is also attempting to address the packaging issue with a recycling scheme in conjunction with TerraCycle, although once again it requires consumers to proactively drop off used goods at a collection point.

While the trend towards more earth-friendly oral care is clear and growing, in the medium term the onus will remain on the consumer to do the mahi and research their options. Meanwhile could someone please invent a bamboo toothbrush that doesn’t feel like I’m sanding my mouth?

 

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