The treasury department and treasurer Joe Hockey have signalled two separate approaches to taxing the likes of Facebook and Google, with Hockey going hard, but a discussion paper on tax circulated outlining a more gentle approach.
The treasury released its Re:Think white paper on taxation on Monday, as discussion on the tax status of large multinational companies such as Facebook, Google, and more recently Netflix, continues to garner headlines.
The treasury, in its discussion paper, said a carrot and stick approach would be the best way to ensure more income would stay in the country instead of going offshore.
“For multinational companies, a lower corporate tax rate would reduce the incentive for tax planning and profit shifting from Australia,” the paper read.
“This would potentially reduce the revenue that is lost to tax planning and allow the resources devoted to tax planning and compliance activities to be used more productively in the economy.”
However, it also flagged potential problems in the move, and treasurer Joe Hockey has been more strident in his commentary around multinational companies.
“I see people who do not pay the legitimate level of tax in Australia as thieves. It means you pay more tax than you should, and I think that's unfair. That's unfair. So, we're on to it, and there's more action to come," Hockey was quoted by the Australian Financial Review as saying.
It is thought the Australian government could be looking at the UK's diverted profits tax as a guide to its own action. In the UK, multinational companies are taxed a 25% tax rate on profits declared overseas but accrued locally.
This is above the 21% tax rate standard in the UK.
Communications minister Malcolm Turnbull had previously flagged charging the likes of Facebook and Google GST on advertising revenue raised in Australia.
“The Australian media industry is under enormous pressure from online platforms, notably Facebook and Google,” Turnbull said.
“The modest amounts of company tax both companies pay in Australia has been a matter of great concern … internet age companies should be taxed in a matter that delivers a fair return to the countries where they make most of their money.”
As reported by AdNews earlier this month, US subscription video on demand platform Netflix is not charging GST on subscriptions, as it is not obligated to do so under Australian law.
The lack of GST means it is able to offer the cheapest subscription rate out of its main rivals, Stan and Presto, which both charge GST on subscriptions.
Facebook, Google, and Yahoo have previously declined to comment on their tax arrangements on Australia, and whether they were worried about the government's increasing rhetoric on the issue.
They also said that they had not been in talks with the government or treasury officials on its intentions.
However, the AFR noted that Australian Tax Office officials had been embedded within the organisations to figure out how they operate.
The mooted tax crunch has the potential not only to affect larger companies such as Facebook and Google, but also the slew of overseas tech companies pouring into Australia, targeting the advertising industry.
One such company, AdRoll, said it was unconcerned by the comments made by Hockey and a move to crackdown on the tax arrangements of multinational companies, as it was confident it was compliant with tax laws.
“We have advice from and work closely with local and international lawyers and accountants to ensure that we are operating inline with current legislation,” managing director Ben Sharp said.
“AdRoll is incorporated in Australia and compliant with all relevant tax laws and legislation.”
It also denied that any tax changes would affect its investment in Australia.
“Our investment into this market is not influenced by potential changes in tax legislation. We see a large opportunity in the Australian market and have invested in response to that,” Sharp said.
Other ad tech companies are thought to be weighing up their responses before commenting.
Facebook was unable to respond to questions posed by AdNews by deadline.
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