Multinational giants accused of shifting Australian revenue offshore

Four of the world’s largest companies have been under investigation by Australian tax authorities, amid new evidence from US executives about how Facebook, Google, Apple and Microsoft are shifting money to offshore tax havens.

Appearing before a highly anticipated public hearing into corporate tax evasion, the executives endured questions about why so much of the revenue generated in Australia ultimately ended up booked elsewhere.

Microsoft’s corporate vice-president of worldwide tax, Daniel Goff, said some of the $1.8 billion revenue generated in Australia had been transferred to Microsoft’s regional headquarters in Singapore and Ireland to fund research and development.

He also revealed the global tech giant had reached a last-minute confidential settlement with the ATO ahead of the hearing – a development Australian Taxation Office commissioner Chris Jordan described as “awfully coincidental”.

Explaining the various audits, Mr Jordan told the inquiry that “enough was enough” and publicly accused multinational companies of shirking their obligations.

“We were fed up with those corporate taxpayers choosing to engage in behaviour amounting to gaming and stooging tactics to avoid their tax obligations,” he told the inquiry.

Facebook’s global vice-president of tax and treasury, Ted Price, confirmed the ATO was conducting an audit of the US-based company, covering “most of the years it had been in operation in Australia”.

Despite the social media giant’s predominantly online interface, Mr Price said advertisers had to meet face-to-face with Facebook in their offices in Sydney and Melbourne for advertising revenue to be booked in Australia for tax purposes.

The comments suggest the actual revenue figure from Australian advertising could be much larger than the sudden tenfold increase the company recorded after an ATO crackdown last year.

Facebook paid $3.4 million in tax last financial year after its revenue jumped from $33.5 million to $327 million over the space of just 12 months.

The chair of the committee, Chris Ketter, told Mr Price: “The average person in the street would look at that and say ‘Up until now you haven’t been reporting your true revenue in Australia’.”

Independent senator Nick Xenophon said Facebook’s claimed $327 million revenue was “not credible”.

Mr Price said prior to the introduction of Multinational Anti-Avoidance Law last year, Facebook’s Australian revenue would have been booked in Ireland, where the company tax rate is 12 per cent.

At a separate inquiry on Tuesday, Melbourne Business School professor Mark Ritson gave evidence that up to $6 billion in advertising revenue was being divided between Facebook and Google in Australia.

Google’s director of international tax, Damon Richardson, told the inquiry Google had placed its headquarters in tax havens Singapore, Ireland and Bermuda for several reasons.

In Ireland he said the company’s 6000 employees needed to “speak a multitude of languages to connect with advertisers across the European region”.

He said until this year the company’s Australian revenue had been booked through its Asia-Pacific headquarters in Singapore, but from now on all advertising from an Australian postal address would be taxed through Google Australia.

Google Australia made up 0.9 per cent of the company’s global profits, 0.4 per cent of Australian taxes and 0.3 per cent of global tax, Mr Richardson said.

Senator Ketter said the figures “seem misaligned”, given Australia made up to 2 per cent of the world’s gross domestic product.

“We believe that we’re paying the correct amount of tax,” said Mr Richardson.

“What happens outside in terms of the Irish structure has no impact on how much tax we pay in Australia.”

Apple Australia’s managing director, Tony King, said neither the introduction of the Diverted Profits Tax or the Multinational Anti-Avoidance Law had caused the technology giant to change its business model.

The hearing was told Apple Australia’s cost of sales – the price it pays to purchase products from global Apple subsiduaries – is 50 per cent higher in Australia than the global average.

Apple’s yet-to-be released 2016 report will show company revenue of$7.5 billion, while earning a profit of $400 million in Australia during that time. That would put its income tax bill at $120 million – $30 million less in tax than it paid last year.

Mr Jordan appeared to suggest Apple had brough its practices up to date through its most recent audit.