Australia has released draft revisions to their tax laws, intended to prevent large firms such as Google from shifting their income to countries with lower rates of tax, such as Ireland and Holland.
The tax revisions remain in line with a push by European counties, notably Britain and Germany, who desire the G20 group of nations to make multinational companies pay their “fair share” of taxes. Australia’s revisions come after recent reports emerged of large firms, such as Google, Amazon and Starbucks, exploiting loopholes in tax laws to limit their exposure to paying local tax in the country in which their income was generated.
Australia's Assistant Treasurer David Bradbury announced that the tax laws were being revised to make sure that companies pay tax on profits made in the country, making special reference to the case of Google Australia.
Bradbury said in a speech to accountants in Sydney: "While the day-to-day dealings of Australian firms advertising on Google might be with Google Australia, under the fine print of contracts Australian firms sign with Google, they are actually buying their advertising from an Irish subsidiary of Google, it is then argued that the source of this income - and therefore the taxing rights under our tax treaty - would be with Ireland rather than Australia."
Australia's company tax rate is 30 per cent, compared to Ireland's rate of 12.5 per cent.
Google Australia would not comment directly on Bradbury's comments, but said it complied with all local tax laws. Google spokespersons made the statement, claiming: "We make a significant contribution to Australia's economy by helping thousands of businesses grow online, providing services to millions of Australians at no cost, as well as employing 650 people locally. We abide by all Australian tax laws."
Bradbury said Google's tax structures involved complicated royalty payments to a Dutch subsidiary which is paid back to another holding company controlled in Bermuda, where there is no corporate tax. Bradbury said: "The profits from the sale of advertising to an Australian firm then sit in a tax-free jurisdiction - possibly indefinitely."