Chris Keall: Will tax-minimising Google get a new appreciation for NZ after founders mercy visit?

OPINION:

Google co-founder Larry Page travelled to New Zealand to get hospital treatment for his young child despite the country’s borders being closed.

The billionaire does not have New Zealand citizenship, but according to multiple reports is spending the Covid-19 pandemic on an island in Fiji. Health Minister Andrew Little said in Parliament this afternoon that MIQ queue-jumping was allowed because it was a medical emergency.

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The timing of the visit – confirmed by acquaintance Sir Stephen Tindall – was initially not clear but Little said the Page application was made via a DHB to the Ministry of Health in January 11, 2021.

But whenever it was, I hope it gave Page a new appreciation for New Zealand.

I have no issue with Page and his family arriving on these shores. Quite the opposite. It’s good to see New Zealand fulfilling a medivac role for Fiji (as long as there’s equal access). And, more broadly, I think the more world-class tech entrepreneurs who visit – or even choose to make their work here during the pandemic – the better.

It does slightly stick in my craw that Page has benefited from our infrastructure at a time when his company has moved quite assertively to minimise its tax exposure in New Zealand (Page stepped down as chief executive of Google’s corporate parent Alphabet in 2019, but is still a director and a major shareholder with around US$120 billion worth of stock).

Google has reported increased revenue in New Zealand over its past couple of financial years, in part by fulfilling a 2018 pledge to book revenue generated in NZ to Google NZ, rather than invoicing it to subsidiaries in lower-tax Ireland or Singapore.

But the tech giant’s taxable income has remained relatively low.

As the same time it booked more revenue to NZ, an-house service fee payments from Google to its US corporate parent ballooned from $85 million in 2018 to $511m in 2019.

How could the service fee suddenly go from under $100m to over half a billion dollars? A Google NZ spokeswoman said the service fee had increased because of a “new operating model”, which was compliant with tax law. The company offered no further detail.

For the 12 months to December 31, 2020, Google NZ has reported revenue that rose to $43.8m from 2019’s $36.2m. The revenue figure was net of the service fee, which increased to $517m.

The fully-owned subsidiary anticipated it would pay $3.3m in tax, on a par with 2019.

Net profit was $7.8m from last year’s $8.12m.

But I’m also aware that tech boss tourism can have a big upside.

The sunnier news is that Google recently revealed it would create its first engineering team based in New Zealand (the local office has previously been confined to sales, management, support and government affairs roles).

A team of Google engineers will relocate from the US – Immigration NZ willing – and be complemented by local recruitment, and attempts to entice skilled Kiwis to come home to join the new Google crew.

The team will work on a high-end project related to AI and privacy.

The NZ engineering team was co-announced by Google’s NZ director Caroline Rainsford and Urs Hölzle – a top Google executive who recently relocated from the company’s Mountain View, California, head office to New Zealand for a year.

Hölzle is a big deal at Google – he’s one of the original 10 employees and a senior vice president driving the US$1.8 trillion company’s cloud efforts today – but maintained his decision to base himself in Aotearoa was separate to a US team being relocated here, and a sudden burst of initiatives to expand his company’s local presence.

Still, some will draw a line between the Google executive’s presence and the major boost the tech giant’s investment in NZ. Sometimes, geography is destiny.

A final note: Sir Stephen says Page’s child received treatment at Auckland’s Starship children’s hospital.

In doing so, he would have benefitted from a donation from another US tech billionaire, Gabe Newell, who donated $286,000 to the hospital in November.

Newell – the Microsoft alumnus who founded the global gaming platform Steam – got stranded in NZ during a March 2020 holiday, then decided to air our pandemic on our shores (a big round of interviews with US gaming media earlier this month confirmed he’s still here).

His Starship donation was making good on a pledge to donate $1 for everyone who watched a YouTube stream of Rocket Lab’s November 3 “Return to Sender” launch which, among other cargo, carried a “Gnome Chompski” figurine on behalf of Newell (on the face of things, it seemed like a very expensive gaming in-joke, though Rocket Lab founder Peter Beck maintained there was scientific structural analysis involved too).

Newell offered to meet with Prime Minister Jacinda Ardern for talks about prising open the border to allow his company to open an NZ office. So far, there’s no sign of that invite being taken up.

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