Three of the largest multinational technology companies have been in Australian court fighting against tax avoidance claims, following various reports that Australia’s corporate tax was not being paid in full by many US companies.
It is a similar situation in the UK, where some of these same companies use Ireland and Luxembourg's low tax to shift away profits. It has led to the Chancellor launching a new program called ‘Google tax’, focused on a five per cent increase in corporate tax alongside regular audits of these companies to check revenue and profits.
Australia has not gone that far, but the new court battle shows it is tired of Google, Microsoft and Apple bending the tax rules. All three use Australia’s neighbour Singapore to divert profits, allowing them 13 per cent off the Australian corporate tax rate.
Even though Apple argued that it pays all profits in full, the company claims to be operating at four per cent in Australia, while showing operating profits at 38 per cent worldwide. Apple also has a base in Singapore, where it allegedly offshores profits.
Several high corporate tax regions are starting to attack multinational technology companies, especially those like Google, Microsoft and Facebook that provide services and advertising that cannot be documented in a single region.
Google claimed that due to its ad sales going through Singapore, it does not need to pay excess tax in Australia. Even though Singapore’s tax is 17 per cent, this can be dropped to as low as 10 per cent in some cases.
Microsoft was definitely more open than the other two, claiming its own Australian sub-division has a poor way of booking sales through Singapore. It did not go as far as to say it avoided paying tax though, only that it used loopholes available.
The lack of clear answers will most likely lead to the Australian court to create a new law to close loopholes. Several countries across Europe are starting to slam these companies over the tax avoidance, claiming it cannot ship profits overseas to tax havens.