Australian tax avoidance clampdown is a double-edged sword, warns Google
Wed 8 Apr 2015
Search giant Google has today warned Australia that its largest companies may face stricter retaliative rulings abroad should it follow the UK’s crackdown on organisations diverting revenue offshore.
The warning was made at a parliamentary inquiry into multinational tax avoidance, which has placed the likes of Google, Microsoft and Apple, among other global tech firms, under close scrutiny for designing corporate structures to lower taxes paid in Australia. By way of example the inquiry cited, Google’s Australian advertising profits, which are taxed in Singapore at a lower rate.
“It is tempting for every government to assume that they will benefit from changes to international tax structures,” said Google Australia. “However, any new rules in Australia would have a similar impact on Australian multinationals operating in overseas jurisdictions,” it continued.
Maile Carnegie, Google Australia’s managing director, argued that the best way to confront the issue was to encourage international collaboration. She quoted figures from Australian mining company Rio Tinto as an example, explaining that a third of its sales take place in China where it also pays less than one percent of its corporate taxes.
Carnegie told the Senate: “If you look at someone like a Rio Tinto, about 35 per cent of its customer base is in China, and they’re paying less than one percent of tax in China, because their Australian headquarters are bearing the risk…” She added that this was a similar case for Google, which pays the majority of its taxes in the U.S.
This latest inquiry comes among a wave of similar hearings taking place globally in an effort to appease public anger directed at international firms avoiding tax radars.
Australia, a world leader in its efforts to control tax avoidance, currently taxes corporate organisations at a rate of 30%. The country actively promotes economic co-operation to develop global tax legislation and is one of six countries – including China – looking into how tech giants are transferring their profits to tax havens.
Treasurer Joe Hockey has discussed introducing a ‘Google tax’ in his May budget, similar to the recently implemented “diverted profits tax” [PDF] in the UK. The Australian MP has been in discussion with British chancellor George Osborne about the levy which requires multinationals to pay a higher tax rate for profits it shifts offshore.
Australian tax commissioner Chris Jordan also added at the inquiry that an international tax framework for diverted profits would be necessary to set out a long-term solution for the issue and to encourage businesses to reconsider their tax practices.