Facebook's "tiny" and "barely believable" tax bill this year makes a mockery of New Zealand's tax loopholes for multinationals, says the Labour Party.

In a statement entitled "Facebook's tiny tax bill demands action from Dunne", Labour's Revenue spokesperson David Clark said the social media site's New Zealand arm paid a mere $14,497 last year.

Its tax bill in the 2010 financial year was an even smaller $5238, he said.

"For a company that has 2.2 million users in New Zealand and makes billions worldwide, that's barely believable."

Facebook appeared to be using the 'double Irish' tax technique, Clark said.

"That's where it uses Irish Facebook, which pays just 12.5 per cent tax, to determine revenue and expenses."

This ensures the company can put most of its revenue through countries with low-tax systems, he said.

"Peter Dunne calls that 'legitimate tax avoidance'. I call it a rort."

Clark said the New Zealand government needed to follow the lead of Australia, which was bringing in laws to clamp down on this type of tax avoidance.

"Peter Dunne doesn't realise that New Zealand is beginning to get a reputation as something of a see-no-evil tax haven."

He said Google New Zealand was also "funnelling revenue" through its low-tax Irish counterpart, paying only $109,038 tax on $4,447,898 in revenue last year.

"That's two per cent, way below our 28 per cent corporate rate.

"These companies should pay the right amount of tax here. That's only fair."

By Ben Chapman-Smith Email Ben