Google, the often quoted example of a multinational shifting revenue offshore and paying little tax in Australia, has made a submission to the Senate inquiry into corporate tax, specifically minimisation and avoidance.
Treasurer Joe Hockey says Australia is “absolutely determined to ensure that companies that earn their profits in Australia pay tax to the Australian government”.
However, Google says nations compete for corporate tax revenue and for investment and growth.
In Asia Pacific region, Hong Kong has a corporate tax rate of 16.5% and Singapore 17%. Singapore also offers further incentives through its Economic Development Board.
Australia’s company tax rate is 30%.
Google says it should be up to policy makers through the G20 process to settle how their respective countries share tax revenue generated by multinational corporations.
And Google warns the Federal Government to take care that any changes to international tax structures don’t disadvantage local businesses.
“The transition to a digitally-enabled economy has made it easier for businesses to deliver services across borders, and this global capability contributes to economic dynamism and growth for businesses of all sizes. The rise of micro-multinationals are seeing small Australian business benefit from overseas sales through the internet. The (Senate) committee would need to consider the impact of any of its recommendations to a small Australian retailer or manufacturer who has found new consumers overseas.”
The message is that it is tempting for every government to assume that they will benefit from changes to current international tax structures.
However, Google argues, any new rules in Australia would over time have a similar impact on Australian multinationals operating in overseas jurisdictions.
On the issue of the tax paid by Google, the US company says its overall corporate tax rate in 2014 was about 19%, a few percent lower than the OECD average of 25%.
Google points out it has for the past six years got an official research and development tax break because of the work done by some of its 500 Australian-based engineers. On top of that, it spends $300 million a year on its Australian operations.
The Australian Government offers a non-refundable 40% tax offset, equivalent to a 133% deduction, to businesses conducting research and development.
Its submission does not say how much tax Google pays in Australia.
However, Google reported paying just $4.1 million in tax on revenue of $268 million.
Google’s full year global revenue for 2014 was $66 billion, up 19% year on year.