We pay our fair share of tax and create jobs, say Google and Apple
Technology giants Apple and Google have said in their submissions to the federal inquiry into corporate tax avoidance that they support international changes to global tax rules to stop profit shifting, but have warned of the risk of Australia acting alone, saying it would cost heavily in local jobs and innovation.
Apple is also resisting pressure to have its tax information published publicly, adding to the chorus of business lobbies that want the Abbott government to scrap existing laws that from July require the Tax Commissioner Chris Jordan to publish the tax details of top companies. The Tax Office has now rejected extending an agreement to lock in the future taxes the company pays, an indication it may use its existing powers to try and collect greater tax from Apple.
Google – which has been the focus of much of the spotlight on multinational profit shifting, including attempts in Europe to introduce a so-called “Google tax” – said in its submission that while it supported the OECD’s crackdown on global profit shifting, governments should not act alone and risk the huge investment the company makes locally.
It said globally Google pays billions of dollars of corporate tax every year, “in fact our overall corporate tax rate in 2014 was about 19 per cent, a few per cent lower than the OECD average of 25 per cent”.
The company had reported its 2013 Australian tax as 15 per cent of profits – or $7 million on a $46 million profit. But this does not include an estimated $2 billion worth of income it earns through advertising locally on its lucrative search engine.
It said to support wide adoption of the search engine and other products Google offers, “many technology companies have funded their products by carrying advertising rather than by directly charging users”.
“This means they can be offered for free, or at least at a minimal cost, to everyone. …a child in Western Sydney, Bourke or the Northern Territory has access to the same information through Google’s search engine that the Prime Minister does.”
Apple – which last week revealed in its financial accounts it paid just $80.3 million in Australian tax last year, despite making more than $6 billion in local revenue – said the Tax Office had now removed Advanced Pricing Agreements (APAs) with the company.
APAs are an agreement between the agency and the company about future taxes they are expected to pay and based on what terms.
Technology giants like Apple have used such agreements with governments all over the world for decades. It has allowed tech giants to legally shift profits to lower tax jurisdictions to avoid paying tax locally.
But now the government revenues have dried up, the OECD is working on a plan, on behalf of G20 governments, to collect more tax from multinationals.
Australian companies have been more frequently going to the ATO asking for APAs in recent years, with the use of it increasing by 12 per cent over the past three years, according to the ATO.
Apple said in its submission it was one of the first companies to enter into such an agreement with the ATO in the early 1990s.
“Apple supports the use of APAs and has had a longstanding, open and cooperative relationship with the ATO that began with the ATO and Apple entering into an APA in the early 1990s,” it said. “Unfortunately, despite the company’s efforts to renew, APL’s APA has expired, but, APL was and remains willing to enter into a further APA with the ATO for future years.”
It said the company still continued “to have an open relationship with the ATO and continues to comply fully with its Australian tax obligations.”
Apple also warned against allowing the information privately collected by tax authorities to be revealed publicly.
Under existing laws introduced by Labor before it lost government, the Tax Commissioner would from July be able to publish the taxable income and tax paid by companies with $100 million or more in turnover.
“Any policies directed at the public disclosure of such agreements need to take into consideration a range of issues, such as the potential disclosure of commercially sensitive information – such as trade and operational secrets, compliance costs, and the potential for the information which is disclosed to be misunderstood or misconstrued,” Apple said.
Apple said it employs thousands of Australians and pays “tens of millions of dollars each year in corporate, fringe benefits and payroll tax”.
“While we are not in a position to comment on the adequacy of Australia’s current tax laws, Apple supports efforts to revisit international tax policies in multinational frameworks and forums,” the submission by its managing director of Australia and New Zealand, Tony King, said.
“In addition, APL’s operations contribute to many thousands of Australian jobs in areas such as retail, logistics and IT directly supporting Apple’s business, as well as providing a platform for many more Australians to market and sell their products -music, television, movies and apps – both locally and globally.”
It said it was normal practice for governments to “regularly use tax incentives” to attract overseas investment from companies like Google.
“It’s easy today to look at these innovations as a ‘sure thing’,” the submission said. “But Google’s success has been built on a series of very big “bets”, that have involved significant risk and have cost billions of dollars.”
Google said the company last year invested $6.8 billion in R&D and “over $300 million every year in its Australian operations and of our 1,000 local employees, around 500 are highly skilled and talented engineers”.
It supported the OECD’s moves to change the global tax system as long as they did not result in double taxation. “Today’s structures have grown up over many years and everyone would benefit from a simpler, more transparent tax system,” Google said.
“We believe that coordination at the G20, rather than unilateral action by individual countries, is the best way to do this while maintaining certainty and avoiding government to government tax disputes.”
It said the internet generated some $50 billion in economic value in Australia – as much as exports of iron ore or the entire retail sector. “It supports 190,000 jobs, many of which are highly skilled, and is enabling sectors to function economy wide. Australia will benefit from a regulatory environment that nurtures and encourages the local digital economy and these smart jobs now and into the future,” it said.
The submissions from the tech giants come after the Tax Office this week revealed that more than half of Australia’s trade is money being sent offshore by companies to their overseas arms – with almost a third going to Singapore and Switzerland.
