IMAGE: AP IMAGES/ASSOCIATED PRESS
Apple, Google and Microsoft have faced an Australian Senate inquiry into corporate tax avoidance on Wednesday.
The tech giants have given evidence to a committee regarding the low amounts of tax paid locally in comparison to their profits. From the coy responses of the big three, one may come to the conclusion that the profits are lost somewhere in the Bermuda triangle.
All three companies admitted they are being audited by the Australian Tax Office, clarified that profits are being sent offshore but refused to be drawn on a myriad of questions from Greens senator Christine Milne, who initiated the inquiry.
Here is a rundown on how the three multi-national companies responded to questions regarding their interesting tax practices while giving evidence at the inquiry.
Apple
Apple’s managing director in Australia Tony King fronted the inquiry on Wednesday, claiming that the company met all of its tax obligations in Australia — despite reports it was funnelling revenue through Ireland, which has a corporate tax rate of 12.5%.
King refused to be drawn on questions from Milne, such as the definition of a "double Irish sandwich with Dutch affiliations" and why money from the company is going from Ireland to the Netherlands and back again. He repeated that all revenue and business in Australia is recorded as required.
"All of our revenue is recorded in our books here. All of our costs of doing business here are recorded in our books and we buy products from affiliate companies outside of Australia," King told the inquiry. "All of our costs and our revenue are clearly accounted for."
Apple paid $80 million tax on $6 billion worth of revenue in 2014, according to Fairfax Media, with the company shifting $8.9 billion of untaxed revenue via Ireland.
Senator Matt Canavan questioned King on what proportion of the revenue collected from Australian songs on iTunes goes overseas, but King would not be drawn saying he didn't know the figure.
Australia's managing director of Google Maile Carnegie opened by clarifying that "Google does not structure itself on tax, we structure ourselves on what is competitive."
Carnegie told the inquiry that Google Australia and New Zealand paid a low $7.1 million in taxes from revenue of $58 million in 2013.
After being grilled about the tax haven Bermuda, and denying she knew the tax rate in the country was zero, Carnegie admitted Google Australia's profits are taxed in Singapore. "Those profits are taxed, they are taxed in Singapore," she said, also stating all ad revenue is taxed in Singapore.
"All of that revenue gets booked in Singapore. This is the way the global tax system works. If the government chooses to change that system then we will abide by that," Carnegie said. Singapore has a corporate tax rate of 17% compared to Australia's 30% rate.
Carnegie told the inquiry the majority of Google's taxes were paid in the U.S., due to the headquarters being based there and where the company undertook the majority of its research and development, which is what drives the companies profits.
"The explanation for why an Australian multi-national, whether they be in mining or in biotech, is able to generate the majority of their revenue outside of Australia but pay the majority of their taxes inside of Australia is that the Australian-based headquarters does most of the investment and carries most of the risk," she said.
"That explanation is also why Google pays most of its taxes in our U.S. headquarters, because the U.S. headquarters is where the majority of our costs are borne."
Milne then quizzed Carnegie on the revenue brought in from Google Maps, which was developed in Australia, but Carnegie advised she will have to take the question on notice.
Microsoft
Microsoft's corporate vice president of tax Bill Sample was also low on details when grilled by Milne. When the senator put to him questions regarding Microsoft's use of the Cayman Islands as a tax haven, he denied it. "To the best of my knowledge, we have not and don't intend to use the Cayman Islands," Sample said.
A frustrated Milne pushes: "So where do you use, then? Bermuda? Where?" To which Sample confides: "We do have a licensing subsidiary in Bermuda."
He admits he faced a U.S. Senate inquiry into tax avoidance in 2012, where it was revealed Microsoft moved $21 billion offshore between 2009 and 2011, according to the BBC. And despite the U.S. Senate referring to the practice of companies moving funds offshore as "egregious to dubious validity," Sample admits Microsoft has not changed its processes.
Sample tells the inquiry of the $2 billion revenue coming from Australia, 100% of the amount goes through Singapore, in much the same way as Apple.
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