Cisco NZ writes a $4.6M cheque after tax investigation

New Zealand’s tax department claimed its first known scalp in a series of tax investigations targeting multi-national technology companies. 

A note to Cisco Systems NZ’s accounts says a deed of settlement for $4.6 million was signed on 5 December last year following a transfer pricing investigation covering tax years 2013 through to 2017.

Transfer pricing investigations focus on charges made for goods and services between the local subsidiary of a multi-national company and associated companies based overseas. These are required to be made on an “arm’s length” basis, as if the companies were not part of the same group. 

The tax investigators would have been seeking to ensure the payments reflected the true value of the goods and services provided.

“The company is evaluating its transfer pricing adjustment in relation to the above-mentioned settlement, and amounts will be recharged back to the relevant associated companies,” Cisco’s NZ financial statements said.

In an explainer, the Inland Revenue Department said the behaviour of multi-national enterprises impacts on how the wider community views the tax system and the level of confidence the community has in the system’s integrity. 

“The community expects multi-national enterprises to contribute their fair share via the tax system,” it said.

“This may be in conflict with the large potential for revenue losses to arise due to incorrect transfer pricing policies and practices.”

In a statement to Reseller News, Cisco said it was not its policy to comment on the specifics.

“However Cisco is compliant with all global tax law and pays applicable taxes in countries which we operate."

The company is one of several local technology company subsidiaries, including those of Oracle, SAP and Microsoft, understood to be facing similar investigations.

In other local Cisco news, country director Dave Wilson has been promoted and is leaving for California to lead the company’s global sales for internet of things.

“As this new chapter and adventure begins, I close the chapter on near nine years with Cisco ANZ,” he said on LinkedIn. 

“It has been an amazing experience and time in my life. I have made life-long friends and it will be the hardest role and team I've ever had to leave.”

Cisco is now recruiting a replacement.