Government secures Senate numbers for digital tax levy

Arvind Hickman
By Arvind Hickman | 21 May 2018

The government has won support from key Senate crossbenchers to impose a new digital tax on global media platforms like Google and Facebook, Fairfax Media reports.

The move is designed as a sweetener to help the government ram through $35.6 billion in corporate tax cuts, part of a pre-election promise to slash income and corporate taxes outlined in the recent Federal Budget.

The Sydney Morning Herald reports that Centre Alliance senators Stirling Griff and Rex Patrick are “100 per cent behind a digital economy tax proposal”, while the move has the in-principle support of Labor.

Treasurer Scott Morrison confirmed that a digital advertising tax for large global companies now appeared to be inevitable, and would cover companies like Google, Facebook and Uber.

The shape of the tax cut is yet to be determined, but a proposal in line with the EU's 3% tax on advertising revenue from 'globally significant enterprises' with revenues of more than $1 billion has been mooted as one proposal.

Any levy on global companies operating in Australia could be passed onto advertisers or users.

It is questionable whether a levy would actually help the government raise further taxes from multinationals or merely encourage them to find new ways of avoiding tax by siphoning income and profits abroad.

In 2017, Google paid $37 million in tax on an operating profit of $125 million, reporting $1 billion in revenue, which included $604 million from advertising. 

Google earns $3 billion from providing advertising services to the Australian market but its multinational operating structure allows it to move most of this income overseas, avoiding the Australian tax collector.

Google Australia operates as a reseller of Google Asia-Pacific, and $2.4 billion in advertising revenue is marked as a 'cost of sale' and sent to Google Asia-Pacific in Singapore, a low tax regime where its regional head office is based.

Facebook paid $11.1 million in tax on the $476.8 million it declare to local tax authorities. It also paid the ATO a $31.6 million tax debt it had agreed to in a settlement.

The actual revenue Facebook earns from its services to the Australia market is estimated to be around three times as much, but most of this is booked outside of the country.

Both companies adhere to the letter of Australia's tax laws, if not the spirit. 

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