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Australia puts Apple, Google and Microsoft under tax spotlight

by on09 April 2015

Watch 'em wriggle

Australia is the first country to put Google, Apple and Microsoft's "completely legal" tax avoidance under the spotlight.

A Senate Committee on corporate tax avoidance have told the big three they are among the 12 technology companies being audited by the Australian Taxation Office.

It was revealed that all of Google's local advertising revenue is taxed in Singapore which has a lower tax regime.

Apple Australia and New Zealand Managing director Tony King, Google Australia and New Zealand managing director Maile Carnegie and Microsoft's global tax chief Bill Sample, were grilled on the Barbie about the extent of profits earned in Australia, which are taxed in lower cost jurisdictions overseas.

An ATO audit thinks that an extra $1.1 billion in revenues can be squeezed from multinationals by 2017.

Carnegie revealed none of the revenue derived from Google's lucrative advertising business is taxed in Australia, rather it is booked in Singapore where the corporate tax rate is set at 17 per cent, as opposed to Australia's 30 per cent.

"Google Australia provides sales and marketing services to Google Singapore and we get revenue for those services. The money that Google generates is paid directly into Singapore and that is then taxed in Singapore,"Carnegie said.

"The tax for Google Australia is a combination of sales and marketing and R&D services, that is absolutely paid in Australia, but the taxes paid on our advertising revenue is paid in Singapore."

When pressed to disclose the revenue Google generates in Australia, Ms Carnegie declined, saying she feared that would breach US financial disclosure rules.

Put your money where your mouth is

However she did come up with a damn fine argument against changing the rules to tax tech companies more. She said it was hypocritical to criticise global technology companies for using the same approach that Australian mining firms, like Rio Tinto, use when deriving profits from China.

"If you look at someone like a Rio Tinto, they have about 35 per cent of their customer base in China, and they are paying less than one per cent of their tax in China, because their headquarters in Australia is bearing the financial risks and the costs associated with that," Ms Carnegie said.

"These are international tax arrangements and what Google is doing in Australia is very very similar to what Australian companies are doing outside of Australia. I am not sitting here today trying to defend whether those practices ... are right or wrong, they are simply the way the global tax system is currently working and we are trying to operate within that."

The difference is in Australian the mining companies can do what they like. Because they are superpowerful and bring down governments if they are taxed sensibly.

Carnegie said it was up to the government to create a different system, which the company would then abide by.

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