Software giant Oracle New Zealand is contesting a $20.3 million tax bill assessed by the Inland Revenue Department.
The stoush is over what Oracle described as "historic transfer pricing arrangements" it used in the 2013, 2014 and 2015 financial years. Transfer pricing arrangements cover sums paid for goods and services received by a subsidiary from their parent company, which become deductible expenses for tax purposes.
In 2017, IRD issued notices in relation to the arrangements which Oracle said it had objected to.
"The company has lodged statements of claim in the New Zealand High Court to contest the assessments raised," Oracle NZ said. "The company contests the assessments raised and is working with the IRD to explore remedies and resolve the matter."
Based on advice from its advisers, no amounts had been provided for in the company's latest annual financial statements. Oracle NZ's directors said they considered the claims were without basis.
Oracle's New Zealand revenues continued to lift in the year to 31 May, 2021, according to the financial statements. Revenue reached $161 million during the year up from $146.8 in 2020.
However, profit before tax fell from $3.8 million to $2 million largely because cost of product received increased markedly from $115.1 million to $129.5 million.
Almost all of that pre -tax profit was then paid as tax, including $942,285 described as "adjustments for uncertain tax positions".
Cisco Systems New Zealand, which wrote a $4.6 million cheque to the taxman in 2019 after its own tax investigation, also reported its 2021 financials over the Christmas break.
Revenue fell from $36.1 million in 2020 to $32.5 million while pre-tax profit fell from $4 million to $2.8 million. Net profit fell from $2.9 million to $2 million.