Tax “a question of morality” – tech giants grilled by senators

James McGrath
By James McGrath | 9 April 2015
Image from Google

Google, Apple, and Microsoft have been grilled at a senate enquiry, with the three companies separately being investigated by the Australian Tax Office for tax avoidance in Australia.

The three companies faced an enquiry in Sydney yesterday answering questions on how much, or how little, it was taxed in Australia for revenue essentially earned in Australia.

Chair of the enquiry, Senator Sam Dastyari, said the issue was “a question of morality”, rather than legality.

“I think there are some very, very legitimate community concerns about how you are structured, how your companies are engaged in what appears … to be tax minimisation.”

“I'm not casting the activity as being illegal, but the structure of your companies in places like Bermuda, Singapore, and Ireland … raises concerns.”

The three tech giants were being grilled by a senate committee as it was revealed the Australian Tax Office is currently investigating 12 tech companies in Australia, with all three part of the so-called 'dirty dozen' under the microscope.

Apple told the enquiry that it paid $80 million in tax on the $6 billion on revenues accrued in Australia.

Meanwhile Google said that in 2013 it paid just $7.1 million on profit of $46 million derived from revenue of $358 million. However, this does not include revenue from advertising, which it revealed was was run through Singapore rather than Australia.

However, they did not disclose just how much advertising revenue it generates in Australia, saying that it feared such information aired in a public forum would breach US obligations.

“When I think about morality I don't think about geographic boundaries,” Google's managing director in Australia and New Zealand, Maile Carnegie, said. “Fundamentally, Google does not structure itself based on tax but rather being competitive.”

“We are not opposed to paying tax, we are opposed to being uncompetitive. Just like Australia, we have to compete with Singapore, Asia, the US or UK.”

News Corp, which fronted the enquiry session later in the day also said until there was a level playing field, companies would seek the path of least tax resistance.

CEO Julian Clarke told the enquiry that it resented foreign media companies, such as Netflix, paying no tax in Australia effectively being able to undercut local media companies, such as its joint venture with Seven West Media, Presto.

“Clearly when you’re selling something at a dollar less than the opposition – you're clearly at an advantage,” Clarke 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.”

Representatives all three companies were grilled on how much in revenue accrued in Australia ended up in tax havens such as Ireland and Bermuda, with them questioned on “double Irish sandwiches with Dutch associations”.

“I am not an international tax expert, and I'm not an expert on what we do globally. I can talk about what we do here,” Apple Australia managing director Tony King said, saying that he had no idea what “double Irish sandwiches with Dutch associations” meant.

This drew guffaws and a sharp response from senators.

“I find it extraordinary that you don't, because the whole point of this enquiry is to look at whether companies like Microsoft, like Apple, and like Google pay their fair share of tax in Australia,” Senator Christine Milne said.

“It's pretty alarming that some of you would come to an enquiry like this without basic information about where revenue is going and where the Australian sales are going,” Dastyari added.

The enquiry comes as the Australian Government continues to look for revenue ahead of the next Federal Budget.

The government has formulated a tax white paper for discussion on the issue, which flags a lowering of the corporate tax rate to keep multinationals in the country.

Meanwhile, Communications Minister Malcolm Turnbull has flagged charging the likes of Facebook and Google extra GST on advertising sales.

While the top end of the tech game is being publicly targeted by the government, it is unclear how deep the government's intentions run.

While the likes of Apple, Microsoft, and Google have been put under the microscope, it is unclear how substantive any reforms outlined by the government could be.

Fairfax has reported this morning that Uber and Airbnb will face questioning by the senate committee in coming weeks.

Hearings continue in Canberra today.

You can check out a blow-by-blow of yesterday's proceedings here.

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