Uber and Airbnb confirm they send profit offshore

Uber and Airbnb have revealed in submissions to a federal inquiry that they route profit through companies in the Netherlands and Ireland, where taxes are lower.

Uber and Airbnb have told a Senate corporate tax avoidance inquiry that while they comply with Australian tax laws, their Australian operations merely provide support services to parent companies based in the Netherlands and Ireland respectively.

Labor Senator Sam Dastyari, who is chairman of the inquiry – before which Uber and Airbnb could both be hauled – said as new sharing economy services emerged it was vital to get the tax settings right.

“It is alarming when a company is evidently sending untaxed revenue to the Netherlands or Ireland earned from services delivered in Australia,” he said.

“The corporate structure of a company held by a parent in a low-tax jurisdiction such as the Netherlands or Ireland is cause for concern.
“Australia cannot be a spectator as profits are simply shifted overseas through clever accounting methods.”

No detailed accounts

Uber’s director of public policy Brad Kitschke said in the submission that since Uber was “a private company still in the early-investment stage, unlike listed companies [it] does not provide detailed public accounts”.

Uber Australia was a wholly owned subsidiary of Uber International Holding BV, which was based in the Netherlands, he said.

And Uber BV was in turn an indirect wholly owned subsidiary of Uber Technologies Inc.

The head company, Uber BV, was “responsible for the management of our international operations, including our business strategy and development, and financial investments and engineering”, he said in the submission.

Uber BV’s management team set the business objectives for the Australian market, which were then supported by Uber Australia.

But Uber Australia provided only “certain support services, such as local marketing promotions to potential riders and drivers, and to Uber BV”.

“Uber BV pays Uber Australia for the performance of those services,” he said. “Uber Australia complies with all relevant Australian tax obligations.”

Tax structures under scrutiny

Such tax structures, which have been legal under international laws so far, could be changed as governments around the world begin implementing the final Organisation for Economic Co-operation and Development plan against profit shifting, known as Base Erosion and Profit Shifting, which was released on Monday.

The submission noted the OECD plan had been in the works and could change the way companies like Uber were structured.

It also used the business lobby argument that under the plan Australia could lose out to other nations such as China in the taxing of its resources.

“Almost every country in the world would like more tax revenue for their treasury,” Mr Kitschke said in the submission.

“But if the laws being suggested here in Australia were imposed on Australian companies operating abroad – for example in China – the taxes paid by those companies overseas would rise and the tax paid locally would fall.”

“It’s why an international approach to corporation tax reform is needed, and why the OECD effort, which is inclusive of non-OECD countries such as China and India, is the best venue for addressing these issues.”

Treasurer Scott Morrison on Wednesday said the Coalition had given the Australian Taxation Office $86 million to go after multinationals and introduced legislation into Parliament that boost anti-avoidance provisions. “We were ahead of the curve in terms of the initiatives that were announced by the OECD and I think we are making great progress,” Mr Morrison said.

Airbnb calls Ireland home

Airbnb’s Australia and New Zealand manager Sam McDonagh said “Airbnb also complies with all Australian tax laws and pays all required taxes”.
But Mr McDonagh also confirmed that “Airbnb Australia is a wholly owned entity of Airbnb Ireland”.

“Our small team in Sydney performs the marketing and promotional functions relevant to the local market,” he said.

“All engineering, customer service, legal, business development, maintenance and other functions are administered by Airbnb Ireland and are physically based outside of Australia.”

Airbnb’s marketing and analytics teams outside Australia developed and directed marketing campaigns and targeted specific neighbourhoods within cities, “which are then executed by Airbnb in Australia”, he said.

“Airbnb Ireland develops and manages Airbnb’s business operations outside of the United States.

“All transactions relating to users outside of the United States, including guests and hosts in Australia, are handled by Airbnb Ireland, pursuant to applicable laws and regulations.”

The sharing economy had “transformed and strengthened the economy at large” and “the emergence of platforms such as Airbnb have enabled people to use their home in a diversity of ways that benefit the broader community,” he said.