Google and Netflix tipped to be in crosshairs when Senate Tax Inquiry hands down report
Chairman of the committee Senator Dastyari
Online giants including Google, Apple and Netflix are expected to be the targets of the Senate Tax Inquiry report, which is finally expected to be tabled in Parliament this afternoon.
The interim report which is expected to summarise the Committee’s April hearings was meant to be tabled yesterday but was delayed after a copy of the it was leaked to Sevens’ Sunday Night current affairs program.
It is understood it will make a series of preliminary recommendations focussing on both transfer pricing and profit shifting, areas that the likes of Google and Apple have faced criticism over because of the way they funnel cash from Australian transactions through low tax jurisdictions, such as Singapore.
In the case of the online video streaming giant Netflix the deliberate decision to avoid establishing a permanent office in Australia, despite now having over a million of local customers, will also come under the microscope.
The Senate Inquiry into Corporate Tax avoidance was created by the Economics Committee back in October last year, although also some of the suggestions arising from the committee, such as naming and shaming big companies which settle with the ATO has been dismissed by the Abbott Government.
The Tax Inquiry made headlines back in April when Apple, Google and Microsoft appeared before the committee only to be chastised over a refusal to answer questions on taxation in detail.
In the past, a multinational company with a branch in Australia had a local board that was tasked with maximizing profits. But increasingly, Australian operations of multinational companies are becoming agents, shifting revenue offshore specifically to minimize Australian profits. This was evident throughout the inquiry.
During the inquiry there were tense exchanges between Senators and representatives of the three tech players Google, Apple and Microsoft, which revealed the tech trio are among 12 technology companies facing major audits by the Australian Tax Office, amid claims of systematic corporate tax avoidance within the sector.
In her evidence before the committee the managing director of Google Australia Maile Carnegie said the online behemoth’s local operation reported a $46m profit in 2013, which after research and development credits were paid saw them handover $7m in tax – an effective tax rate of 15 per cent.
However, Carnegie’s evidence noted that much of Google’s billion dollar Australian revenue from advertising and other sources – thought to be more than $2bn – is booked through the more tax friendly jurisdictions in Singapore and then moved to Ireland and possibly Bermuda.
“I acknowledge that we do get benefit from that R&D tax credit,” said Carnegie. “That is because we qualify for that but the (ad) revenue that comes from Australia is taxed in Singapore.”
The committee is expected to suggest Australia is right to work with the OECD on multilateral programs to combat tax avoidance, but this should not prevent Australia from also taking unilateral action.
Among suggestions expected to be floated are the “name and shame” public register of tax avoidance settlements reached with the tax office and with tax and revenue agencies also asked to report on tax minimisation estimates they believe are occuring.
Nic Christensen
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