Oracle and Inland Revenue clash over tax bills

Monday, 9 December 2019

It is not all programming and accounting for Oracle bosses - funding high jinx on the oceans is part of the mix.

Business software giant Oracle, which is headed by flamboyant billionaire Larry Ellison, is in dispute with Inland Revenue over its tax bills, the company has revealed in its annual accounts.

Oracle may be best known to most New Zealanders as sponsor of sailing team Oracle Team USA which has regularly tussled with Team New Zealand for the America's Cup.

The multinational is valued at about US$180 billion (NZ$281b) on the New York Stock Exchange.

Its New Zealand subsidiary has reported annual sales of about $140m over the past several years, but has accumulated losses of $13m despite a $1.5m profit in the year to May.

Oracle may be known to most Kiwis as Team New Zealand's nemesis, but it has a long association with Inland Revenue as a supplier as well as a taxpayer.

* IRD shelves Oracle project after spending $21 million

* Microsoft NZ settles tax dispute with 'confidential' $25m payment**

Oracle New Zealand stated in accounts published by the Companies Office late on Friday that it was issued with a 'statement of position' by Inland Revenue in April in respect of 'historic transfer pricing arrangements'.

'In June 2019 the company responded to the statement of position stating its disagreement with the IRD,' it said in its accounts.

'The company remains in discussions with the IRD in relations (sic) to these matters.

Oracle boss Larry Ellison (centre), pictured watching the BNP Paribas Open tennis championship in March, is one of Silicon Valley's best known entrepreneurs.

'Based on advice from professional tax advisors which the director believe (sic) to be within the advisor's professional competence, the group's current treatment of this matter is deemed appropriate and in compliance with taxation laws,' it said.

Inland Revenue had at one stage planned to use software from Oracle to underpin its partially-completed $1.8 billion Business Transformation project to simplify and modernise the tax system.

Microsoft chose to settle with Inland Revenue over a transfer pricing dispute, but Oracle says it believes it has acted properly.

Former Inland Revenue commissioner Robert Russell had forecast in 2010 that the department would use Oracle's Enterprise Tax Suite across all its operations.

But cracks appeared in that strategy the following year after Inland Revenue abandoned a $35m project to revamp the administration of student loans after spending $21m, because of delays.

Inland Revenue once envisaged using Oracle software to revamp its operations, but that plan did not eventuate.

Inland Revenue wrote off the $7.4m it had spent on licences to use Oracle's Enterprise Tax Suite for that project.

Documents released to Stuff under the Official Information Act in 2015 showed that Oracle pulled out of a tender to be the software partner for Inland Revenue's much larger Business Transformation project before officials got the chance to visit any of its reference sites overseas.

Oracle New Zealand reported sales of $145m in the year to May but its taxable income was whittled down by fees and charges of $107m paid to its US-based parent.

The New Zealand subsidiary is owned by another Oracle subsidiary which is headquartered in Ireland.

Oracle New Zealand made a $45m two-year loan to Oracle Technology Company UC, headquartered in Ireland, in February.

The tax dispute has been revealed days after Microsoft New Zealand's accounts showed that it had paid just under $25m in back taxes to settle a dispute with Inland Revenue over its transfer pricing practices.