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Internet giants are denying it is dodging a hefty tax bill in Australia.

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Google Australia, the dominant Internet search engine and advertising service locally, reported a net loss of A$3.9m on operating revenue of $201 m last year, paying just over $74,000 in local taxes.

There has been much debate over multinational companies, in particular technology firms seemingly low tax payments to the Australian government in recent weeks.

But a Google spokesperson denied any wrongdoing in relation to its tax affairs and insisted:

“Google’s tax is compliant with all particular taxation laws in Australia,” he told SmartHouse, insisting the search giant’s presence here is good for the local economy.

And it “complies fully with all relevant tax rules in all the countries in which it operates” the spokesperson added.

“That means that we contribute to all relevant local and national taxation schemes – as well as providing employment for over 650 people in Australia.”

The internet giant is believed to have earned around $1.1 bn revenues in Oz last year, and says the majority of its 650 local staff are engaged in advertising and marketing services, while engineers who work on its local search engine, which generates the bulk of revenue are located outside the country.

Google along with Apple, Adobe and many more engage in ‘transfer pricing’, whereby they channel revenues back through foreign subsidiaries, including Holland, Ireland and other tax havens, where they pay as little as 1.5% tax.

Google Ireland employs over 2,000 in the docklands area of Dublin now dubbed ‘Silicon Docks’ since its is neighboured by the likes of Facebook and LinkedIn, who along with Apple all have their European HQ bases in the country.

“Google’s advertising platforms help thousands of Australian businesses, publishers, and content creators to grow and make money,” a spokesperson told AFR last week .

“We share the majority of revenue from advertising programs like Adsense with Australian website owners and publishers.”

Speaking at technology conference CeBIT in Sydney last week, Minister for Communications, Senator Stephen Conroy, warned corporate Australia of the Gillard government’s intention to reform transfer pricing engaged in by multinatinals to ensure their intra-pricing of products and services would “properly reflect the economic contribution of their Australian operations.”

“This is a problem that goes across all sectors, so we’re bringing across legislation because we think we’ve got to ensure Australians get a fair share,” said Conroy.

Employment Minister Bill Shorten announced reform of multinationals tax treatment in Australia last November and vowed to change the transfer pricing rules in tax law, which the Treasury are now reviewing.

 

“[It’s] just like with the mining tax where we want to make sure Australians get a fair share of the wealth that Australians own,” Conroy added.

But in the age of globalisation, where intra pricing is the norm and business functions scattered throughout the globe, this could be easier said than done.

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