Cisco pays Inland Revenue $4.6m after transfer pricing audit

Tuesday, 4 February 2020

Tax settlement means Cisco's NZ tax bill exceeded its pre-tax profit last year.

The New Zealand arm of United States technology company Cisco Systems has paid $4.6 million in back taxes to Inland Revenue after a tax audit.

Cisco Systems NZ said in accounts filed with the Companies Office the additional tax was with respect to a transfer pricing 'audit settlement compensating adjustment'.

The company has been contacted for further comment.

The settlement meant it paid a total of $6m in tax for the year ending in July, eclipsing its pre-tax profit for the year of $4.9m, which was earned on revenues of $37m.

Cisco, which makes network equipment, is the latest technology giant to have been caught up in an apparent crackdown on multinational taxation practices.

New Zealand's secretive tax law means there is unlikely to be any public explanation of how and why Inland Revenue has decided to settle any of its multinational tax disputes.

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

* Clampdown on tax rorts will bring in $200m a year, Government now says**

Business software giant Oracle, which is headed by flamboyant billionaire Larry Ellison, revealed in its New Zealand accounts in December that it was in dispute with Inland Revenue over its tax bills.

Oracle New Zealand stated that it was issued with a 'statement of position' by Inland Revenue in April in respect of 'historic transfer pricing arrangements'.

It said it was holding discussions with Inland Revenue but believed it was in compliance with taxation laws.

Earlier in December, 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.

The company revealed in 2018 that it was being audited by Inland Revenue over the fees it paid to other Microsoft companies for services they supplied to the subsidiary.

Clauses in the Tax Administration Act mean that Inland Revenue has broad discretion to enter into secret settlements with businesses with effectively no oversight over its decisions from the public or politicians.