The Senate Inquiry into corporate tax avoidance is currently hearing evidence from the Australian heads of Apple and Google, and a senior executive from Microsoft, to determine whether greater transparency is needed to halt multinational tax avoidance.
Google Australia’s managing director Maile Carnegie said the company spent $9.8 billion on R&D last year. The majority of its tax was diverted back to its headquarters in the US.
She said Google supported tax reform but did not believe in unilateral action. She said it would result in less innovation, less jobs and less growth.
“It’s very easy to underestimate the risks and costs,” Carnegie said. “The US is where the majority of where our risks and costs are born.”
Microsoft’s corporate vice president of tax, Bill Sample, defended the company’s corporate structure which is spread across multiple jurisdictions.
Apple Australia Managing Director Tony King denied the company has any strategies in place to minimise the tax it paid in Australia.
King said it books all the costs of doing business, revenues and sales made in Australia with its local company. Last year the company’s Australian entity made $6 billion in revenue.
“Apple in Australia and Apple globally is a product company,” King said. “We have a small-ish digital services business.”
“We book all of our sales in the books of Apple Australia…We declare all of our income in accordance with Australian law.”
When questioned about how much Apple Australia purchases products, such as an iPad, from local marketing companies.
“We are a distribution business in the Australian market,” he said.
“We buy [products] at an arms length price, which would be as if Apple in Australia was a separate entity. We are following globally accepted transfer pricing principles, we are following Australian principles.”
King said Apple did “not do any development, we do not do any manufacturing” in Australia.
The Apple, Microsoft and Google executives revealed their companies were three of about a dozen tech companies being audited by the Australian tax office.
When questioned by Greens leader Senator Christine Milne one whether Google operated a “double Irish sandwich with Dutch affiliations”, the company’s Australia managing director Maile Carnegie admitted Google does not have a simple tax structure globally.
“I’m not a tax expert… I acknowledge there is a lot more complexity to the Google global tax structure,” she said.
“The work that we do in Australia, if another company was doing that work… we would get an external company to do an audit.
“We get benefit from R&D tax credit. Revenue from Australia is taxed in Singapore.
“I believe most of the profits are taxed in the US. I’m aware that Google has an arrangement with Bermuda.”
When asked again about how Google’s international tax arrangements work, Carnegie said “we have a bit of a different business model.. we don’t actually set any of the prices for that… it’s all basically done through an auction.”
The Senate Inquiry will be making a series of recommendations, based on the findings presented, as part of its final report to government.