The Inland Revenue Department is currently embroiled in a transfer pricing dispute with business software titan Oracle. Oracle received a statement of position with regards to taxes owed in April of last year. However, Oracle responded in June stating their disagreement with the matter. Professional tax advisors have commented that Oracle’s behaviour on this issue is in accordance with regulating tax laws.
Oracle’s New Zealand subsidiary, which is owned by another Oracle subsidiary based in Ireland, obtained sales of around $145 million in 2019, which was an increase from the previous year’s profit of around $138 million. Their taxable income dropped due to payment of around $107 million to the parent company located in the United States and losses were estimated to be in the range of $13 million. Earlier in February, a $45 million loan was made by Oracle New Zealand to the parent company in Ireland.
Back in 2010, Inland Revenue planned on using Oracle’s Enterprise Tax Suite to modernise the country’s tax system, but has since changed course due to a failed administrative student loan project in 2011. Inland Revenue spent $21 million on the project and wrote off the $7.4 million it spent on licensing fees to use Oracle’s Tax Suite.
Microsoft was recently in the spotlight for tax disputes with Inland Revenue. It has since resolved back tax payments of around $25 million. Tax authorities have their sights on a number of technology-based companies who take advantage of their transfer pricing arrangements.