Apple Is About To Get Slapped Over Its Australian Tax Bill [Updated]

Last year in Australia, Apple took $6 billion worth of revenue. That should be great news for all involved, because Apple ought to be paying a whole mess of tax on that, too. Not so. Apple only paid $40 million in taxes. That's less than one per cent. Federal MP for Chifley and the IT industry's caped crusader, Ed Husic, is set to raise this issue in the House today, and as we understand, it's not going to be pretty.

Husic raised the issue in the chamber today with a speech that is scathing of not just Apple, but also of other tech giants dodging their massive tax bills — read: Google.

To get these businesses to foot their bills, Husic is spearheading an effort to amend international tax agreements.

Husic pointed out that Apple Australia's creative accounting left him and others scratching their heads. After generating $6 billion in revenue in 2011-12, Apple Australia notched up $5.5 billion in local costs, vexing the MP:

How? They do not manufacture here. They have no factories here. I do not know what their R&D effort is here—I do not know if they are claiming that this is driving their costs up. They have got a growing number of retail outlets, which I am happy about—they are creating jobs locally; that is great—but surely those outlets do not cost $5.5 billion to maintain.
They have a head office here, but you would not know it because they maintain a cloak of invisibility and their key management team dodge any scrutiny and refuse to even engage on public policy issues. Given the lack of work they do on that front, you would hardly say that it cost $5.5 billion to maintain a head office here and dodge that limelight. According to Mark Zirnsak of the Tax Justice Network Australia, 'it seems somewhat incredible that they have $5.5 billion in costs'. I imagine that their costs are probably tied to transfer pricing arrangements, which again is the subject of an element of the amendment bill that we are debating now. I imagine that the costs are tied to that transfer pricing arrangement between Apple's Australian operations and their US parent.

Husic said that he had been a fan of Apple, but after the gadget giant's continual dodging of governmental intervention, his enthusiasm has dimmed.

Google also copped a shellacking from Husic, but added that they were at least willing to communicate with the government.

Read the full speech here (PDF).


Comments

    I'm sure Tim Cook is quivering in his boots

      I sure hope so. Our government should join forces with other governments to make sure that gubernational companies don't go around rooting everybody.

        I think he was being sarcastic haha.. just look at X-Zibit's face.. you can tell

        Yeah! Who do Apple think they are?!?
        Supplying us with the quality electronics we want... those bastards.

          I think the terms "quality" and "we want" are pretty subjective. I don't want Apple products and I certainly wouldn't consider them quality.

            We wanted them more than our $6 billion (collectively, not you specifically).

              $6 billion is the most worrying number here. Putting it into context that's more than a quarter of our population buying a 128GB 3G iPad 3. It's rather disturbing when you think about it that way (though I do realise Apple also make money off their app store, iTunes and other various software, not just on their hardware products).

              What's even more incredible is when you read stats that say Android smartphones are starting to dominate market share in this country, with Android tablets also closing the gap rapidly. It goes to show you that even though it's a well known fact we are being ripped off when it comes to tech products with the infamous "Australia tax", we are a country that can't seem to get enough of it.

          by taking the money paid to them by Australian citizens, taking $6 billion, of which (based on the manufacture cost to retail cost of an iPhone 4), would equate to roughly $5billion in profits, then paying almost zero tax due to a dodgy loophole.

          theres about $2 billion dollars that apple are stealing from funds that could be spent on education / infrastructure / healthcare or whatever. but no, they're shipping it back to line the pockets of some jerk in America.

          so yeah. they're bastards.

            Yeah but we're just going to spend the money on plain–packaging for soft drinks legislation so

              Regardless of what it would get spent on by the government, this missing tax money would be funding that the government didnt have to pull from other areas to fund their policies.

              So if apple adhered to the law & paid the $2 billion p.a. owing, the Govenment wouldnt have to take $2 billion out from welfare / education / healthcare / infrastructure etc. to fund their plain packaging plans.

              So yeah. Still bastards.

              Edit: any company that does this is a bastard, not just apple. but the articles about them being called out about it, so theyre being used as the example.

              Last edited 06/02/13 2:13 pm

                Add on to the GST instead of taxing profits, then there is no incentive to lie about them.

                Sorry but they are adhering to the law. They have done nothing the legislation won't allow them to do. Any one paying more tax than they have to has rocks in their head!

                If any one, blame the legislators for making laws that allows this!

                  why defend them? they're abusing a loophole in law, so while it may not be technically illegal, its certainly not ethical / moral.

                  you're defending a global corporation who is using legal technicalities to more or less steal from you.

                  So it's been going on for 10 years. Why the heck has nothing been done about such an obvious thing.

      Get ready to get whooped... that is exactly the attitude that needs the big boot of the law up your ass!

    Not sure Ed Husic is the federal member for Husic.

      Maybe that should be a new rule for Parliamentarians - get elected in a certain area and have to change your surname to the electorate name.

        "Australian Prime Minister, Julia Lalor"- works OK

        "Opposition Leader, Tony Warringah" hmmm.

          Luke Hopewell: Federal Member for DERRRRRRRRRRP.

          Apologies for the error, folks. Now fixed.

          Well you certainly couldn't use the name Manly Warringah when describing Dr No.

    The don't pay taxes on revenue, they pay taxes on profit. I would hazard a guess that their profits weren't $6bn.

    Edit: Looking here, it seems the issue is that they are claiming very small profits (by perhaps transferring them to other countries?). (http://delimiter.com.au/2013/01/29/apple-australias-tiny-tax-bill-staggering-husic/)

    Last edited 06/02/13 11:58 am

      OK, say the Net Profit from that $6Bn in revenue is $2bn.
      $40,000,000 is still only 2% of that....

      $5.99 billion revenue, $0.435 billion Gross Profit. So Apple USA is billing Apple Australia roughly 93% of the list price of the products they sell and calling it an expense. It was probably more but the Aussie dollar went up.

      Exactly. All the multinationals do this - the local company pays huge fees to the parent corporation (which just happens to be incorporated in a tax haven), and this is counted as a business expense, so the remaining "profit" is barely taxable at all.

      Governments around the world regularly complain publicly about it, but for some reason are unwilling to close the long-standing legal loopholes that make this possible...

        Its not that they are unwilling. It's that it would require unilateral action.

        There are specific laws regarding this already in Australia, but the difficulty is proving intent, basic concept of the law is if you have a structure just to avoid tax it is illegal.

    I want my tax dammit, build me better roads, even if Apple has to fund them.

      I think everyone can agree on this - who cares what side of the tech debate you may be on, fund my country!

      really, you saw what they did with apple maps, if they fund it, you can sure as hell bet they'll have a hand in its development. we'd never be able to get anywhere then. ha ha ha

      But if apple builds roads, they'll change the roads to fit apple maps...

      If apple builds roads, they'll be white and your car will need to run iOS to drive on them

      apple's transport infrastructure would be made of gorrilla glass and the kerbs will be alumnium with a diamond cut chamfer. The RTA cameras will have brand new crystal lenses to record the traffic

      its gunna be magical and revolutionary

      As long as Apple doesn't actually build the roads.

        Nah, they'ed be made by Chinese people.

    Everyone in this thread, the writer and the minister need to learn about TRANSFER PRICING and ADVANCED PRICING ARRANGEMENTS - the ato and the American tax office agree on the level of proft. The minister needs to keep out of things he doesn't understand.

      Agreed! Seems like an excuse for some good ol' Apple bashing in parliament. If what he said was outside parliament it would probably be considered slander.

    If the NBN was coming from the budget then Apple could build a small portion of that

    Not sure why we are all jumping up and down about Apple. Ikea has been doing it for years around the world. They have everything funnelling back to a dutch charity. In 2010, they paid like 2.5mil in taxes in aus.

      Yeah but Gizmodo readers don't hate Ikea in fact they enjoy their low, low prices

    If apple ends up having to pay extra taxes, they'll just jack up the retail price of their products in Aus to cover the shortfall.

      ...and pay more taxes still on that extra mark up.

        but they will gain 70% more of that markup in profit

          Except that they have to compete with Samsung

    Isn't tax based on profit? In that case, wouldn't Apple over in the US bill the Aus counterpart for an amount close to what they sell the devices at, making Australian profit actually quite low compared to revenue? *shrugs*

      Apple US makes a product for $100, then sells it to Apple AU for $500, Apple AU then sells it to AU consumers for $600, making a $100 profit, while Apple US makes $400 profit & pays no AU taxes.

      numbers are made up, by the way.

        The real numbers are approximately Apple make a product for $55, sells it to Apple Australia for $93, who sell it to consumers for $100. Then Apple Australia covers its other costs out of the $7, leaving $2 to pay tax on at 30%. Voila - $40 profit, $0.60 AU taxes.

    I blame them for not stopping boats.

    Apple makes money because people voluntarily hand over money for their products. The government takes money under threat of law. Who has the high moral ground here?

    I agree Apple (and most multinationals) should be blocked from this transferring of profits (how?). Don't forget though that if they turn over 6 billion the government will be collecting 10% of this with the GST. Isn't that $600 million?

    Yeah, don't look at the economic stimulation, the tax paid on transactions, wages, advertising, shipping, rent, electricity, insurance, etc... fuck off and enjoy the millions and millions of dollars Apple contributed in all the ways it did to Australia - hands off the profits ya leeches.

    Ed Husic, is set to raise this issue in the House today, and as we understand, it’s not going to be pretty.

    Without reading the full speech, the bit you quoted doesn't lead to any suggestion there will be any whooping being handed out. It was a series of questions that paints it as if the guy has almost no knowledge on the issue, as well as providing no evidence against them other than basically saying "I don't like it".

    Maybe theres more in the full text...I don't know, I can't be bothered reading it. It would be good however if the quoted text actually backed up the claim that wrong doing was done. Forty million is low, but that alone doesn't indicate wrong doing.

    It wouldn't surprise me if many of the tax dodges being used were put there deliberately by parliament at some point to encourage international trade as opposed to it being a stroke of genius on Apples part.

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