Joe Hockey Wants A 'Google Tax'

Photo: Getty Images

Australia looks set to reform corporate tax requirements for companies who declare profits obtained domestically, but declared overseas, after the UK announced plans for a so-called “Google Tax”.

Treasurer Joe Hockey said Australia is “absolutely determined to ensure that companies that earn their profits in Australia pay tax to the Australian government”.

Last week, the BBC reported UK Chancellor George Osborne declared he would be implementing a so-called “Google tax”. He said the levy would deliver around £1 billion over five years to government coffers from multinational organisations.

According to Osborne, a 25% tax is being imposed on “profits generated by multinationals from economic activity in the UK which they then artificially shift” abroad.

Australia’s version of the UK’s Diverted Profits Tax (DPT) would potentially be an expansion of the current 30% company tax rate on profits declared overseas, obtained through domestic revenue streams, the AFR reported.

Joe Hockey is cracking down on corporate tax. Photo: Getty Images

“We are closely monitoring new developments in the United Kingdom. We see it essential that all corporations contribute to the country in which they operate,” Hockey said during a press conference today.

“It robs Australians when multinationals don’t pay tax here and we are going to do everything we can but it’s got to be coordinated. You can take unilateral action here but if other jurisdictions let multinationals get away with it then what you do domestically isn’t going to work.”

Hockey said the Australian Tax Office (ATO) is using extensive existing powers and the government is contemplating additional legislative action.

“The developed world has had enough. We’re not going to cop this minimisation,” he said.

The Treasurer would not specify companies in the firing line for the corporate tax crackdown but one example of a multinational earning large sums but paying little tax in Australia is Apple. In 2013, the computer giant had revenues for more than $6 billion in Australia but paid just $56 million in tax.

Another is Google which reported paying just $4.1 million in tax on revenue of $268 million.

In October, Ireland revealed closed a “Double Irish” tax loophole that had the potential to cost U.S. companies including Apple and Google billions of dollars.

Analysts and tax advisers predict that corporations which need access to the EU’s 500 million consumers will find it difficult to set up equally effective schemes in other member states as Brussels investigates arrangements that involve paying minimal tax rates.

“The question is where do you go to? There’s nowhere else in the European Union. It’s just getting too hot,” said George Bull, head of the tax practice at advisory group Baker Tilly.

Facebook paid zero dollars in corporation tax in the UK last year, despite making an estimated $US596 million in revenue in the region in 2013.

Details of Australia’s plans could be agreed to by cabinet as early as today.

Google Australia was contacted but declined to comment.

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