REPORT: There’s a ‘Google tax’ in the May Budget

Joe Hockey. Photo: Getty / James Alcock.

There’s a report in the AFR today that the Federal Government will use the May Budget to roll out a “Google tax” which targets profit shifting tactics used by multinationals.

On Tuesday, Treasurer Joe Hockey said the government was determined to go after companies which do not pay legitimate levels of tax in Australia and that the ATO had embedded officials to understand how to go about it.

One of the issues the tax would target is the practice of transfer pricing which is often used by large multinationals when they load up costs in high tax jurisdictions, like Australia, and book profits in places where tax rates are lower.

The AFR reported Hockey turned to British chancellor George Osborne for advice after the UK established its diverted profits tax which taxes profits declared overseas but earned from local activity.

But the tax would reportedly be 25%, higher than the UK’s 21% tax rate.

Here’s what Hockey said:

“I asked the Commissioner of tax to embed people from the Tax Office in those businesses operating in Australia to understand their business model. And because of that embedding, we now understand how they make their money in Australia, and now can appropriately formulate the way to tax it for that activity in Australia,” he said.

“So we’re working on it, we are determined to do it. I see people who do not pay the legitimate level of tax in Australia as thieves. It means you pay more tax than you should, and I think that’s unfair. That’s unfair. So, we’re on to it, and there’s more action to come.”

There’s more here.