As it happens: Tax avoidance inquiry - Google, Apple, Microsoft & News Corp

8 April 2015

This afternoon Google, Apple, Microsoft and News Corp are facing an enquiry into tax avoidance. Maile Carnegie, Google MD, and News Corp Australia CEO Julian Clarke give evidence.

Yesterday, News Corp came out ahead of the hearing, refuting claims made by Fairfax papers yesterday.

We follow the court proceedings as they happen:

Afternoon session:


CEO Julian Clarke and CFO Susan Panuccio are up now.

98% of revenue is in Australia. All of the tax on the profit is paid here in Australia to the ATO. Clarke outlines organisational structures including the split of News Corp and 20th Century Fox "to unlock the true value of both companies".

Calls the Fairfax story "inaccurate".


Corporate tax is not his priority: Upstream from corporate tax are the things that will make us and Australia great. Creating new business, building new business, creating employment and growing markets.

The national challenge for us is to grow the economy ... on that purpose we share a common cause.

Clarke calls for a level playing field and notes that foreign media companies, such as Netflix, pay no tax in Australia, and undercut local media companies, such as Fairfax's joint venture with Nine, Stan.


Clarke: Other foreign media companies operating online in Australia are selling advertising, but invoicing that advertising overseas is something that [the committee] should definitely have a look at because it's a way of routing income beyond Australian shores.

I take full responsibility to pay the right tax – no more no less.


Susan Panuccio, News Corp CFO: News Corp is required to report consolidated accounts within Australia. The bulk of the publishing assets, Foxtel, FoxSports etc, sit under News Corp Australia Holdings. She says there are other accounts outside of that, including Eureka, that are reported separately.

“Just because we repatriate cash [to the US business] – doesn’t mean we should pay tax on that cash." She highlights the US tax treaty that reduces tax to 0% because News Corp is 100% owned by an American company.

Milne asks if the reason for structuring the company in such a way was expressly to avoid tax.

Panuccio denies it: Repatriating cash is not a tax avoidance strategy. We don't pay tax on cash, we pay tax on profit.

Milne asks why a dozen News-owned businesses don't file accounts. Panuccio refutes it, saying it is consolidated under the umbrella company and is exempt.


Clarke says it's too early to tell if Netflix is having a significant impact on its streaming business, Stan – “But clearly, when you’re selling something at a dollar less than the opposition, you're clearly at an advantage,” he said.

“If GST was applied to them as it is to us, it would be a level playing field. But they’ve clearly got an advantage now that's unfair.”

Sen. Dastyari asks if revenue from advertising clicked on The Australian is reported here in News Corp's consolidated earnings, referencing Google's evidence earlier today that revealed Google does not.

“It's my understanding of the evidence from Google that if I click on an ad, they don't even report that income in Australia – it's reported in another jurisdiction. It's reported in Singapore."

Sen. thanks both for appearing at the committee and moves on to the Property Council of Australia.

1pm session:

Google, Microsoft, Apple

Google Australia earned $358 million in revenue last financial year, profit of $46 million. It paid $7.1 million in taxes.

Says it pays majority of taxes in US as US takes majority of R&D risk.

Google says R&D is best aimed at startups and warns against taking unilateral tax action.

85% of R&D for Microsoft is done in the US, and the IP is owned by the US office.

Labor senator Sam Dastyari says: “We're not here to accuse you of tax avoidance. The question is about morality. The Australian public do not like the look of artificial tax structures which seem to be designed to avoid paying your fair share."


Google Australia does not structure business to avoid tax, but to be competitive, it says. Points to Asian nations' tax rates. 


Apple says it pays income tax based on net profit, rather than revenue. Denies that it artificially inflates the cost of tech imports to reduce its tax, and denies that it has tax minimisation strategies in Australia.


Sen. Milne asks: "What is a "double Irish sandwich with Dutch associations"?

Apple - "I have no idea, senator". It's a reference to Apple's Irish arrangements.
Sen. Milne: "You are acting as if you are a separate entity to your international company, but you are not."
Referring to buying stock from international affiliates.
Twelve tech companies are being investigated by ATO. Apple is one of them.
Neither Apple nor Google can answer questions on international tax arrangements.
Milne: "Well I find that extraordinary".
Google: Revenue from Australia is taxed in Singapore. Tax on advertising revenue is paid in Singapore.
Microsoft: "We do not use the Irish double sandwich". Products sold in Australia are sold by salespeople primarily located in Singpore, customers are billed from Singapore.
Apple in Australia is owned by Apple Ireland.
We pay profit on revenue generated here. Those profits are taxed in Singapore.
Google questioned on tax arrangements funnelled through Bermuda – which has a tax rate of 0%.
Apple claims revenue of $6bn in Australia last year. Doesn't answer how much of the money went overseas.
Sen. Xenaphon: "Did you seriously turn up today not knowing the answer to that question? I find it extraordinary that you can't answer and weren't expecting a question like that."
Carnegie says she would be breaching US laws if she declared Australian revenue.
Carnegie: What Google is doing in Australia is very similar to what Australian companies are doing in other countries. I'm not trying to defend it but it's simply the way that the global tax system operates.
Sen thanks all for appearing at the senate: "There are some legitimate concerns about how your companies have engaged in what appears to be tax minimisation. I'm not accusing that the behaviour has been illegal – but the structure raises concerns."
Where to from now: The committee will explore opportunities to make sure that a fair share of tax is paid in Australia. It will make recommendations to the Government.

Committee due to return in 10 minutes when News Corp CEO Julian Clarke will give evidence.

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