Australia is preparing to amend its tax laws to target Google and other large multinational companies who routinely use legal loopholes to skip out on their tax bills, Reuters has reported.
According to the news agency, Australia has unveiled a preliminary version of a modification to its tax regulations that would prevent multinationals from routing their income through countries such as Ireland and Luxembourg, where they enjoy much lower corporate tax rates.
The revisions are designed to make sure that firms pay local tax on profits made in the country, said Australia’s Assistant Treasurer David Bradbury, pointing to Google Australia as a prime example of legal corporate tax-dodging.
"While the day-to-day dealings of Australian firms advertising on Google might be with Google Australia, under the fine print of contracts Australian firms sign with Google, they are actually buying their advertising from an Irish subsidiary of Google," Bradbury told accountants in Sydney.
"It is then argued that the source of this income - and therefore the taxing rights under our tax treaty - would be with Ireland rather than Australia,” he added.
In Ireland, corporations are asked to pay 12.5 per cent in taxes, whereas firms doing business in Australia are taxed more than twice that amount, at a rate of 30 per cent.
Predictably, Google has insisted that it operates according to all local laws, though a spokesperson declined to comment directly on Bradbury’s speech.
"We make a significant contribution to Australia's economy by helping thousands of businesses grow online, providing services to millions of Australians at no cost, as well as employing 650 people locally," a Google spokesperson said in a statement.
The news comes after Google and other multinational giants, including Facebook, eBay and Starbucks, came under fire in the UK for paying minimal taxes. Earlier this month, Britain and Germany announced plans to lobby the G20 to ensure that multinational corporations are obligated to pay their “fair share” of taxes.