Some of the biggest tech companies in the world have been known to shift profits around to minimise the amount of tax paid. The Australian Taxation Office (ATO) just released a report for the 2017/8 financial year, and while most companies appeared to be paying the full corporate tax rate, others paid a lot less. Some even paid nothing.
The ATO's Corporate Tax Transparency report for 2017 and 2018 has been released and it shows a number of companies, including Atlassian and Afterpay, paid no tax that year.
When Gizmodo Australia asked Atlassian and Afterpay why no tax was paid despite having taxable incomes running into the millions, Atlassian responded it invests in research and development projects, which offset its tax requirements.
"As one of the biggest tech employers in the country, we invest millions in Research and Development (R&D) every year to create products that transform how teams work together at more than 150,000 companies around the world," an Atlassian spokesperson said.
"That deep investment generates R&D tax offsets for every dollar Atlassian spends on eligible R&D activities, reducing the company's Australia tax payable."
Afterpay didn't respond in time for publication.
Tech companies don’t pay their taxes.
Dr Antony Ting, a tax evasion expert at University of Sydney, explained why companies generating huge profits are able to avoid paying the full tax corporate tax rate of 30 per cent in Australia.
"It is not uncommon for this to happen when, for example, the company has tax losses incurred in previous years which are carried forward to the current income year and fully offset the current year’s taxable income. Therefore, the company does not have to pay any tax this year even though it has taxable income before the carried forward tax losses," Dr Ting told Gizmodo Australia.
Notably, Google's tax rate fell well under the 30 per cent corporate tax rate required during that financial year. It paid $37 million in tax on a taxable income of a little over $188 million — equating to 19.76 per cent. It's understood Google had also invested heavily in research and development to offset its tax sum.
While other major tech companies, like Microsoft, Apple, Facebook and Amazon, all paid the specific amount, their taxable incomes paled in comparison to their overall incomes. This meant only a fraction of their revenues went to tax. PayPal Australia paid just $36,809 on its nearly $509 million because its taxable income was just over $122,000. Out of Facebook's half a billion in revenue, it paid nearly $12 million on a taxable income of $42.5 million. Both amounts equated to the 30 per cent tax rate.
"We comply with applicable tax laws in every country we operate, including Australia, where we've voluntarily set up a sales and invoicing structure so that revenue from advertisers supported by our teams in each country is recorded in that country. We chose to make this change to provide more transparency into our revenue and pay more tax in Australia," a Facebook Australia spokesperson told Gizmodo Australia.
"We understand that the Organisation for Economic Co-operation and Development (OECD) is currently working on possible tax solutions for an increasingly digitised economy to provide certainty for businesses to operate domestically and abroad. We continue to support multilateral approaches like that being undertaken at the OECD."
Similarly, Amazon Australia told us because of investments in Australia, their profit margins meant tax paid was lower than one might expect.
"Corporation tax is paid on profits, not revenue, and that, given the heavy investments Amazon has made in Australia as we build our business here, it is only natural that profits are low. We pay all applicable taxes in Australia and every country where we operate. Our focus is on continuing to grow our offering for Australian customers and investing in our local business, creating jobs and economic opportunity for thousands of small businesses across the country."
An overview of tax paid by major tech companies in Australia during 2017/18
|Overall income||Taxable income||Tax paid||Tax rate|
|AFTERPAY TOUCH GROUP LIMITED||$126,172,196||$19,583,979||$0||0%|
|AMAZON CORPORATE SERVICES PTY LTD||$387,358,547||$25,013,594||$7,504,078||29.99%|
|APPLE PTY LTD||$9,253,704,773||$402,799,140||$120,776,231||29.98%|
|ATLASSIAN AUSTRALIA 1 PTY LTD||$1,044,197,038||$137,962,558||$0||0%|
|FACEBOOK AUSTRALIA PTY LIMITED||$479,897,834||$42,465,671||$12,739,701||29.99%|
|GOOGLE AUSTRALIA PTY LIMITED||$1,025,894,419||$188,114,299||$37,165,945||19.76%|
|MICROSOFT PTY LTD||$2,280,728,398||$204,173,826||$61,252,148||30%|
|PAYPAL AUSTRALIA PTY LTD||$508,706,067||$122,697||$36,809||29.99%|
|SAMSUNG ELECTRONICS AUSTRALIA PTY LIMITED||$2,503,629,012||$75,200,932||$22,560,280||30%|
|TELSTRA CORPORATION LTD||$27,799,403,920||$5,204,253,560||$1,511,514,175||29.04%|
|UBER AUSTRALIA PTY LTD||$474,119,803||$16,926,993||$5,078,098||30%|
Dr Ting said to Gizmodo Australia that we're getting better at stamping out tax avoidance but there are some key issues which prevent the country from getting the full tax rate from multinational enterprises (MNEs).
"Australia has been improving its tax law to combat corporate tax avoidance over the past few years. However, there are still key issues that remain unresolved, for example, transfer pricing," Dr Ting said.
"Even though MNEs like Google and Facebook operate as global highly integrated enterprises, evidence revealed that their subsidiaries in Australia are reporting profit margins much lower than the group’s overall profit margins, and much of the group's profits are booked in low tax jurisdictions. The OECD is working on these issues, aiming to design tax policies to address these challenges, especially those arising from the digital economy."
"Apple's subsidiary in Australia purchases its goods (e.g. iPhone) from an overseas group company. The purchase cost of the iPhone is a deductible expense in Australia, and this intra-group price is to a large extent determined by the group. This is the transfer pricing issue, which is a hot topic in the tax world nowadays."
On Monday 16 December, a report was released by the Australian National Audit Office (ANAO) probing into the efficiency of the ATO's Tax Avoidance Taskforce, dedicated to ensuring muiltinational corporations were paying their fair share of tax within the country.
The ATO's taskforce was introduced in 2016 and given $679 million to tackle multinational companies who were shifting profits in order to minimise tax paid. It claims to have recovered $7.9 billion in tax liabilities and $4.4 billion in cash collections in that time but the ANAO's report outlines it's tough to independently verify how much revenue it actually raised.
The ATO responded to the report defending the taskforce's success.
"The success of the taskforce is prompting large multinationals, public and private groups to proactively manage and prevent tax risks in their business by adopting robust tax governance arrangements through early and open engagement with the ATO," the ATO said on its website.
"[The taskforce's] funding has enhanced and extended existing compliance activities targeting large multinationals and high wealth individuals."