back to article Google, Microsoft and Apple explain their tax tricks in Australia

Representatives of Google, Apple and Microsoft Australia today appeared before a hearing into Corporate Tax Avoidance convened by the nation's Economics Reference Committee, and all struggled to explain just where the money goes or whether what they do is fair. All three also admitted, after being told they were permitted to …

  1. Anonymous Coward
    Anonymous Coward

    I can understand the need to be competitive to keep prices down but these people don't do that.

    They collude to keep wages down for sure, they've been done for that.

    But when Apple is sitting on a huge pile of cash you get the impression they are perfectly competitive, they just have lots of money sitting in tax havens they can't use as it will get taxed as soon as it is moved to the US. What is the point of dodging the tax then?

    1. ratfox

      Apple has lobbied for a tax amnesty.

      Essentially, the argument is that there's no way they will bring the money back to the US if it is taxed at the usual rate. So it makes sense for the US to give them a "tax holiday", allowing them to repatriate the money at a lower tax rate! Because that way, the money can be invested in the US economy instead of sitting uselessly in an offshore bank account.

      Apple's Tim Cook To Propose Profit Repatriation Tax Changes

      1. Ian Michael Gumby

        @ratfox... Not quite...

        From the article:

        "It's not hard to see why: Apple's managing director for Australia and New Zealand Tony King explained that the company generated AU$6bn in sales last year and paid $80m in tax on $250m of profits. That skinny margin comes, he said, from the fact that Apple Australia pays other members of the Apple group for the kit and content it sells here, but that the cost of developing those products is baked into the prices it pays even though product development is all done in the USA."

        But here's the thing. That money is being siphoned off by the intermediary and is not coming back to the US. Higher tax? Yeah, but its a catch-22. They claim that they are paying more for the product that they buy from their internal division but that money isn't going back to the US.

        In terms of a tax holiday... they can invest that money off shore tax free and then bring it in later.

        In fact, they can borrow in the US against it and write off the interest rate, reducing their effective tax rate.

  2. Bob Wheeler

    Which MS Product is in decline?

    "Sample didn't have a neat answer, but did admit that Microsoft's use of Irish tax arrangements are in decline because the product line that was given the “Double Irish Dutch Sandwich” treatment is in decline"

    Can anyone say which product of MS is in decline? Is there something they are not telling us?

    1. busycoder99

      Re: Which MS Product is in decline?

      Probably all of them. Their only products growing market share are the ones that make them no money.

    2. StareClips.com

      Re: Which MS Product is in decline?

      The Zune.

    3. Trevor_Pott Gold badge

      Re: Which MS Product is in decline?

      Windows, Windows Server, Exchange, SQL Dynamics and virtually every other product that you might consider installing on premises is considered "in decline" and "legacy" by Microsoft. Microsoft has radically altered it's sales structures such that the only way you make your quotas is to sell Microsoft's public cloud services. Based on this, Microsoft it not merely seeing a slowdown (or halt) in growth for these segments in the market, it is actively trying to reduce those product lines to zero.

      You will put all your data in Microsoft's cloud, you will submit to American legal jurisdiction and you will pay subscription fees for everything, especially when you hit a downturn and can't actually afford it. There will be no more of this "owning your own infrastructure" or "stretching your purchases a few years". You will pay Microsoft what they feel is their due per endpoint and per user (for frontend and backend services) and you'll do it with a smile in your wallet, goddamn it.

  3. Anonymous Coward
    Anonymous Coward

    "What is the point of dodging the tax then?"

    To kill off the competition and to strike deals to return some of the money, but only if the government promise to reduce the amount of tax they have to pay.

  4. This post has been deleted by its author

    1. Anonymous Coward
      Anonymous Coward

      surely not even Google would release a beta after the real one, or keep something in Beta for nearly 60 years ....

    2. NotArghGeeCee

      No, that would be Bill Stiles

  5. William Donelson

    I have a dream: BANKERS (and tax cheats) in PRISON.

    1. Michael Xion

      I have a better dream: politicians in prison as they're the ones who make the rules that allow the bankers and tax cheats to get away with it.

  6. Terry Cloth
    Devil

    Don't worry, this sort of thing will stop soon.

    When the Trans-Pacific Partnership is ratified, the corporations will be grilling the legislature.

  7. Anonymous Coward
    Anonymous Coward

    How are Apple's profits / taxes incorrect?

    If they have $6 billion in revenue let's assume they sell only iPhones for simplicity (no lower margin products like Macs, iPads, Apps, iTunes tracks etc.) That comes to 10 million phones at $600 each. $250 million profit comes to $25 profit per phone, paying a third of it in taxes.

    Australia is unhappy based on Apple's GROSS MARGIN, but if Apple didn't sell anything directly into Australia, but it was all sold through whatever Australia's equivalent of Walmart and Best Buy are, Apple would be selling at wholesale pricing and the retailer would be permitted a small markup and they'd have to profit off that. And guess what, selling a small fast selling item like an iPhone for $600 when you buy them for $550 and have $25 of per unit sales cost is not at all out of line. Companies like Walmart have much thinner margins than that.

    Tax treaties specify transfer pricing should be done based on arm length pricing - that is, the wholesale price Apple would charge a retailer that operated in that country. So Australia can whine all they want, but unless they want to tear up tax treaties, or they want to make people believe Apple's wholesale price is significantly lower than that, they don't have a leg to stand on.

  8. Getmo
    Facepalm

    Will our gov't ever realize?

    There will *always* be a tax haven.

    Just like in a competitive free market, some enterprising country will open its (tax) doors as others close theirs, inviting the Headquarters of those mega corporations to pack up and move like they've done in the past.

    You cannot 'force' a multi-national corporation to pay taxes if you can't explain your own tax code in 5 pages or less. (More than that = guaranteed loopholes)

    In US our IRS tax code is over 1,700 pages, and every politician promises to "fix it" by appending more pages. The official tax code literally contradicts itself in several places.

    Warren Buffet illustrated this to Obama while he was making the same empty promises, stating publicly that he paid into a lower tax bracket than his secretary.

    They demonstratedly do not understand things that these corporations designing advanced systems already do:

    + Complexity does not always = "Better"

    + "The simplest solution is usually the correct one" — Occam's Razor

    + The more moving parts you have, the more that can go wrong (i.e. = "loopholes")

    + KISS = Keep It Simple Stupid (or my personal fav, "Keep It Stupid Simple")

    The only real solution is to become a tax haven yourself. Then all the companies who fled will say, "Hey, we can move back home!" pack up and come back to where they started.

    Our attractive (international) tax code will then even attract businesses from other countries trying to grow internationally and escape the burdens of their local country's taxes.

    Obviously, "revised tax code" does not mean "no taxes". There are only 2 things for certain in this life, after all.

    What I'm saying: there's absolutely no reason our taxes have to remain as complex as they are. It's extremely wasteful. It is a problem, and there are many angles and solutions.

    Personally I prefer a single flat sales tax (like Fair Tax), meaning no more Income Tax, illegal immigrants automatically pay their taxes when they shop, and even tourists pay tax when they shop here. (Sorry Tourists!!) Everybody would have more money in their paycheck, and prices of goods would remain the same. Hey, and we get to be a haven for business again, yar!!

    1. Lost it

      Re: Will our gov't ever realize?

      Three things. Someone had sex with your mum.

  9. Peter 39

    record companies

    “I just bought an album on iTunes: how much of that money goes to tax havens and how much is taxed in Australia?”

    For the answer to this - they'll have to haul in the record companies. Apple takes a 30% cut but pays all the sales cost, delivery, billing etc. The 70% for the record companies stays mostly with them - the artists don't see much.

    1. gnasher729 Silver badge

      Re: record companies

      Not quite. The record companies get 70% of the advertised price. But lots of people pay with gift cards that they get with 15%, 20% or 25% rebate. If I pay £42.50 for a £50.00 gift card, how much money does Apple get from that card? And when I buy goods, the record companies / software developers etc. get £35.00 of the £42.50 that I paid.

  10. crayon

    "Personally I prefer a single flat sales tax (like Fair Tax), meaning no more Income Tax"

    Assuming that there is a "single flat sales tax", it would have to be set at rate that will generate the equivalent income (for the government) as all the present taxes that it is replacing.

    "and prices of goods would remain the same."

    Absolutely not, see above.

    "Everybody would have more money in their paycheck"

    Maybe, but for those on lower incomes their spending power will be greatly reduced by the huge increases in the price of goods. Regressive taxes does not help in building a progressive society.

    "politicians in prison as they're the ones who make the rules that allow the bankers and tax cheats to get away with it."

    Bankers are the ones who pay the politicians to make the rules that allow the bankers and tax cheats to get away with it.

    Since it's a chicken AND egg situation, the solution is to put both of them in prison.

  11. JeffyPoooh
    Pint

    "Alternative Minimum Income Tax"

    "Your Corporate Gross Profit Margin was 38% as you admitted in your Annual Report. Since you forgot to make any profit in Australia, we'll just apply the same profit margin to your total sales here, as a legislated Alternative Minimum Income Tax."

    Such an approach would quickly level out the income re-distribution.

    1. gnasher729 Silver badge

      Re: "Alternative Minimum Income Tax"

      It seems you don't know that "Gross Profit Margin" means. Hint: It's not profit.

  12. Anonymous Coward
    Anonymous Coward

    Yadda yadda yadda

    This "problem" is not fixable without taxing the actual turnover of the corporations. It's simply too easy to manipulate the figures otherwise - I'm 60+ and I've been watching companies that I've worked for fiddle their figures my whole life.

    When you are a corporation, tax is optional - you just decide who little you can get away with paying and adjust the numbers accordingly.

  13. Lost it

    I'm finding this out for myself since my Ltd Co started up. I send HMRC taxes I've worked out we owe, and they seem to send most of it back...

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