- It’s been revealed that Netflix pays an effective tax rate of around 0.5% in Australia on between $600 million and $1 billion in revenue.
- The tax arrangement is perfectly legal, with Australian users of the streaming service charged by its Dutch subsidiary.
- It’s also not alone, with companies like Google, Facebook and even Atlassian are paying either no tax or paying less than the 30% corporate rat due to deductions and concessions.
How would you like to pay almost no tax on hundreds of millions of dollars? Maybe you should become a tech company in Australia.
Netflix, for example, raked in between $600 million to $1 billion from Australian subscribers in 2018. And yet, the streaming service paid just $341,793 in tax here, according to the AFR. That sets its effective tax rate at around half of one cent on the dollar.
The corporate tax rate in Australia is 30 cents on the dollar, 60 times Netflix’s tax rate. It’s managed to get away with it by billing Australian customers with a Netflix subsidiary based in Amsterdam, incurring a Dutch tax rate accordingly. The only tax Netflix is believed to pay in Australia is on the $12.1 million “service fee” the global company pays its local arm here.
In other words, the US-based company is possibly moving as much as 1 billion Australian dollars to Europe to pay a better tax rate. The magic of corporate structuring.
Of course, all of this is likely legal, with companies using deductions and concessions to reduce their tax bill. Business Insider Australia suggests no wrongdoing, but it does highlight a serious problem with corporate profits disappearing offshore and multinationals avoiding local tax.
It’s also certainly not alone, with ABC analysis suggesting as many as one in five large companies have paid $0 in tax between 2015-2018. Many of those, the ATO maintains, could be for legitimate reasons. Perhaps they weren’t making profits, were eligible for tax concessions or are structured like Netflix.
Here are some of the other tech giants that have managed to legally pay less or no tax in Australia.
For a long time, big tech paid no tax in Australia at all. That was meant to change last year, with the multinational anti-avoidance laws (MAAL) brought into play. Promised to finally make them pay their fair share, it doesn’t appear to be working, despite their own claims to the contrary.
Google made $4.3 billion in revenue in Australia, largely in advertising dollars. But the search engine paid just $26.5 million in tax or 0.6%, about on par with Netflix.
Likewise, Facebook made more than $500 million last year. It paid $11.8 million in taxes or around 2.3%.
The reason they get away with these figures because tech multinationals are notoriously opaque in how they calculate their expenses.
Take Apple for example, which made $900 million gross profit in 2018. It then claimed more than $500 million in expenses. However, what some of those deductions are exactly, Apple doesn’t publicly disclose. By making those enormous deductions, Apple slashes its taxable income by more than a half, eventually paying $164 million in taxes and claiming it satisfies the corporate tax rate.
Those additional deductions in 2018 ensuring Apple paid less tax than the year prior, despite making $71 million more profit.
Despite being handed a $1 billion five-year contract from none other than the Australian government itself, IT company IBM has a tendency not to pay much tax at all in Australia. Last year, for example, it reportedly didn’t pay a cent.
To be clear, that means the company which is paid handsomely to build the ATO’s very systems, doesn’t pop up in those very same systems with a taxable income.
Atlassian might be Australia’s tech darling and valued at ten figures, but its tax bill is far smaller.
In fact, the Sydney-based company made over $1 billion in revenue in the last financial year but paid no tax, due to a combination of operating losses and research and development (R&D) tax concessions.
Correction: This article originally suggested that Apple could have paid 30% tax on its gross profits, rather than its taxable income.
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