The world’s biggest technology companies are booking an additional $7 billion in sales in Australia every year, which means they are paying twice, triple and even five times the amount of tax they were previously, Australian Tax Office officials told a parliamentary inquiry.
But trouble could still be brewing for some. While Apple said it had not been issued any penalties associated with a five-year audit by the ATO and Microsoft has just reached an out-of-court settlement, Google, Facebook and IBM confirmed they were still being audited.
Executives of the companies appeared before the Senate economics committee inquiry to corporate tax avoidance on Tuesday. The inquiry has been running since 2014 and for Apple Australia managing director, Tony King, it was his second appearance.
“When we last met, I told the committee an audit of Apple Australia was under way,” he said. “The audit was a lengthy and rigorous process that involved a comprehensive review of Apple Australia’s business. I’m pleased to report the audit has concluded and that no penalty was imposed by the ATO.”
Executives of Facebook and Google told the committee their companies had restricted as a result of Australia’s Multinational Anti-avoidance Law.
The MAAL is aimed at preventing profit shifting by ensuring companies who make sales to Australian customers have a taxable presence here.
“By changing its laws, the Australian government told the corporate community it expected a change in behaviour and we have responded,” said Google’s director of international tax, Damon Richardson. He said Google had been given an amended assessment by the ATO but he was not willing to give details. The company was also being audited for a five-year period.
Facebook vice-president of tax and treasury Ted Price said his company was being audited for “most of the years in which we’ve been doing business” in Australia. Facebook opened an office in Sydney in 2009.
IBM Australia and New Zealand managing director Kerry Purcell said an audit had begun this month.
Microsoft’s Michael Gough said his company reached an in-principal settlement with the ATO in May and a deed of settlement was signed on Tuesday, coinciding with the hearing.
Mr Gough said Microsoft had restructured to report revenue and expenses “in country” in four major countries including Australia. But he insisted the process started before the MAAL came into force.
Tax Commissioner Chris Jordan used the hearing to claim it was job done on tax-avoiding multinationals. He said BHP, Crown, SingTel and Rio Tinto had disclosed tax adjustments publicly and the ATO had issued $4 billion in assessments in the last financial year.
“Also of this $4 billion total, more than $1 billion was raised from 10 audits of companies as part of our focus on the e-commerce sector. For one high profile taxpayer, our compliance activities resulted in a five-fold increase in the amount of tax they paid,” he said.
Mr King said Apple’s 2012 tax return had been subject to audit. The ATO then looked at Apple’s returns all the way through to 2016, he said. “The ATO has confirmed that all of our taxes through the audit period are current and up to date.”
Mr King also said neither the MAAL nor Diverted Profits Tax, the second of two key measures introduced by Australia to deal with multinational tax avoidance, had affected Apple.
“We’ve had it confirmed to us that our transfer pricing methodology is correct by virtue of a very comprehensive audit with the ATO so we don’t expect MAAL or DPT to impact Apple’s tax position in Australia,” he said.
ATO deputy commissioner Mark Konza later sought to elaborate on tax paid by Apple.
“My hearing of the evidence today was that for the five year period up to 2011 Apple said that they had paid about $171 million in tax and for the five-years from 2011 to 2016 they had $630 million tax,” he told the committee.
“They also said today that whilst their revenues had grown by a factor of just over two…their tax had grown by a factor of just over three.
“They were giving evidence today to show they were paying significantly more tax in Australia than they had been in past years and I think that’s welcome news.”
Mr Konza also said it was no surprise the MAAL did not apply to Apple.
“Apple told this inquiry 18 months ago that it was located in Australia, it recorded its sales in Australia and it paid GST in Australia,” he said. “In those circumstances the MAAL would never be expected to apply because they were already here.”