Australia eyes missing billions with very own ‘Google tax’

After the Australian Tax Office yesterday announced it was investigating several multinationals for tax minimisation Antony Ting examines what a ‘Google tax’ would mean for Australia in this cross-posting from The Conversation.  

Joe Hockey has hinted he may introduce a “Google tax” as a new weapon to tackle profit shifting by multinational enterprises. The Treasurer’s suggestion is not only political as a counter to aggressive tax avoidance by multinationals, but also suggests the government may not have full confidence in a successful outcome of the G20/OECD work on base erosion profit shifting (BEPS).

The suggestion of a “Google tax” in Australia appears to be a coordinated action with the UK. Last week, the UK Treasury announced the introduction of a “Diverted Profits Tax” (commonly dubbed the Google tax). The tax will be imposed on profits artificially shifted from the UK at a rate of 25% from 1 April 2015. The tax is expected to generate more than £1 billion over the next five years.

Details of the Australian tax are yet to be delivered, but it’s likely to work as follows, using Apple’s tax structure as an example. Apple has successfully sheltered US$44 billion in Ireland for four years, and that amount has never been taxed anywhere in the world. The US$44 billion represents the profits shifted from Apple’s sales in many countries, including Australia.