back to article 'Google tax' already being avoided, says Australian Tax Office

The Australian Taxation Office (ATO) has warned that the nation's attempts at imposing a "Google Tax" are already being circumvented, and suggested big accountancy firms have found a way around efforts to stymie multinational tax avoidance. Australia's Google Tax, formally known as the Multinational Anti-Avoidance Law (MAAL), …

  1. Sebastian A

    Hands up anyone who's surprised. Nobody? Gee I wonder why that is.

    Ask a politician to craft a law to fix an accounting loophole and I'd be surprised if you get anything more effective than a "please don't do that".

    1. Mark 65

      Just goes to prove that the more complicated you make the tax code then the more areas to which you can introduce such issues and flaws. A tweak here, a deduction there and guess what? Yep, a few more loopholes created.

      1. dan1980

        @Mark 65

        At this point (and many others,) I am reminded of that lovely line from Jurassic Park: "life finds a way".

        Well, money finds a way.

        Complex laws - even if supposedly targeted at 'big businesses' - actually serve to further advantage the big end of town because they are the ones who have the resources to negotiate around them and make them work in their favour. Smaller companies just have to deal with it.

  2. Dagg Silver badge

    But, But they are lawyers...

    There was a letter in the local paper that stated that politician needed to be lawyers to allow then to create laws.

    Guess what, they probably ended up as politicians as they were crap lawyers.

    1. Anonymous Coward
      Anonymous Coward

      Re: But, But they are lawyers...

      I have been saying this for years

      "Laywers who become Politicians only pass laws for the benefit of other Lawyers"

      If I had any say in the matter, I'd limit the number of people with a law degree who could sit in Parliament.

      Legisltatures are supposed to represent their electorate. What percentage of the population at large are lawyers? What is the percentage of elected represntatives are lawyers?

      My guess is that the latter will be a lot higher than the first especially in the USA.

      Here it might be that Politics and Economics graduates who have never had a job after Uni outside of politics might make up a good proportion of MP's. Make this lot have 10 years of real work before they can even stand for election.

      Vote for 'none of the above'. You know it makes sense!

      1. Doctor Syntax Silver badge

        Re: But, But they are lawyers...

        "If I had any say in the matter, I'd limit the number of people with a law degree who could sit in Parliament."

        The sad reality of this is that you'd still end up with loopholes and laws that did damage you didn't intend to innocent people.

  3. A_Melbourne

    Smack them with an "enhanced" GST

    Pretty easy to do. Let them keep their profits wherever they wish, but just stun them with a GST of say 25% for all business carried out in Australia. If they then decide to bring onshore a fair share of their profits, reduce the GST pro-rata.

    It would sure put a lot of Australian accountants out of business - and upset Obama no end.

    1. Invidious Aardvark

      Re: Smack them with an "enhanced" GST

      GST is effectively a consumer tax, so you're proposing to 'hurt' the multi-nationals by making Australians pay more taxes on the goods that multi-nationals sell here? Apart from increasing the price of their goods, the blame for which the companies will place on the government, what exactly are you hoping to achieve by this? The multi-nationals will make the same number of sales and the same profit as now, unless there happens to be someone selling equivalent products more cheaply (which seems unlikely for most products because the competitors for a given category of goods are usually other multi-nationals running the same schemes so they'll all be subject to your enhanced tax).

      Your solution makes consumers pay more tax without hurting the multi-nationals one iota.

      1. This post has been deleted by its author

        1. Invidious Aardvark

          Re: Smack them with an "enhanced" GST

          "I think he was suggesting that the tax be levied against corporate revenue as opposed to standard corporate taxation on profits."

          Attempting to tax revenue would be a fantastic way of ensuring that no-one wants to do business with Australia. We're a tiny tiny tiny market in the global scheme of things and it would be suicide for any government to even float the idea.

  4. LaeMing

    Avoiding tax is perfectly legal, of course.

    Finding ways to do so is is what tax accountants are employed to do. If they failed to do so, they would be negligent and probably legally liable.

    If the government doesn't want taxes avoided, they need to close the loopholes they originally created. Not whine about it like a child complaining about how unfair their being sent to their room is.

    1. Anonymous Coward
      Anonymous Coward

      Re: Avoiding tax is perfectly legal, of course.

      Oh if only it was that simple.

      They (Government / lawyers) are all shitting in the same pot.

      Once again, it is the "little" people that suffer. You know, those of us actually doing work and propping up the shysters and benefit / tax avoiders / fraudsters etc.

      Go on, dont pay your tax for a month and see how long it takes before HMRC are on your case and i almost guarantee they will recoup that paltry sum of unpaid tax.

      But, be a multinational with big fat corporate fingers in every fucking pie and avoidance "technique" and there will be lots of blustering and sound byting by our elected "representitives" but nothing will be done. The aftermath of their own dodgy tax arrangements aren't something they want airing.

      1. LaeMing

        Re: Avoiding tax is perfectly legal, of course.

        While I largely agree. Be careful not to mix up concepts of Tax Avoidance (perfectly legal for anyone and even sometimes encouraged - things like tax breaks for investing in particular things needed by society) with Tax Evasion (very illegal, even for big companies).

  5. rtb61

    Submit Offshore Tax Returns

    The easy way around it, is any offshore costs must have the offshore tax return submitted to validate the claim and to ensure any profits generated are taxed at the point of revenue. Until that cost is substantiated and profits all tied to the point of revenue, than taxes should be imposed at the maximum rate on the total revenue. The demand for offshore tax returns prior to allowing deduction needs to extend as far as necessary, at any point they fail to supply accurate returns, than that cost is excluded from the revenue to be taxed.

    Don't like, quite simply, bugger off and make your revenue elsewhere. All taxes should always be paid at the point of revenue, where the country in question provides the infrastructure and social welfare systems to enable that revenue to be generated.

    1. Dr. Mouse

      Re: Submit Offshore Tax Returns

      All taxes should always be paid at the point of revenue

      I'm disagree.

      Let's say I invent a new widget. I designed it in the UK, set up manufacturing facilities in the UK, and start successfully selling through my own chain of shops in the UK, retail.

      I then open a retail chain in, say, Germany. They do nothing but import the widgets and sell them. I charge them a fair wholesale price, and they retail them in Germany for the same cost as I do in the UK, in the same volumes as I do in the UK.

      The majority of the "value" is "generated" in the UK, whereas about half the revenue is generated in Germany. In my opinion, therefore, it is fair and correct that the majority of the profit is declared in the UK. The only value generated in Germany is from selling it.

      If you look at it another way: Instead of opening my own sales office in Germany, I just sold wholesale to a retailer over there. In this case, it is right and fair that their only "profits" on my widgets come from the margin over wholesale at which they sell. They shouldn't be taking half the overall profit.

      Profit should be declared where the *profit* (or value) is generated, not where the revenue is generated.

      Of course, this all assumes that all "transfer pricing" is fair, i.e. it is the same as would be charged to an external entity, and is a price they would pay. It also assumes they don't set up contrived arrangements just to funnel profits into tax havens. But I definitely don't think that you should tax based solely on where revenue is generated.

      1. Buster

        Re: Submit Offshore Tax Returns

        But the profit generated by online advertising is not by selling consumers widgets to consumers in another country but by selling consumers to advertisers. So any value generated from the transaction is done where the consumers are and often the advertisers are in the same country as the consumers as well. We only matter as consumers and nothing else.

        1. Dr. Mouse

          Re: Submit Offshore Tax Returns

          But the profit generated by online advertising is not by selling consumers widgets to consumers in another country but by selling consumers to advertisers.

          I wasn't talking about advertising, but the argument applies equally to advertising and other services.

          Take Google's ads. The are not only selling eyeballs to advertisers. They are also selling a service which, in theory, chooses the right eyeballs to sell them. Therefore, a portion of their value is the consumer, and a portion is added through Google's expertise and services.

      2. Anonymous Coward
        Anonymous Coward

        Re: Submit Offshore Tax Returns

        This is how it used to be done. Indeed transfer prices were not "fair" but adjusted 2x year in order to make sure that 60% of the profits end-up in the country that hosted the R&D and 40% of the profits ended up in the country doing the sales and marketing. And that this arrangement - and the numbers - were open to any tax authority who wished to inspect it. But not any more.

      3. Anonymous Coward
        Anonymous Coward

        Re: Submit Offshore Tax Returns

        Let's say I invent a new widget.

        What widget? A fake patent on a special method to roast coffee so I can charge all subsidiaries a price such that they do not declare profits and the profit ends up in Netherlands? A patent on rounded corner, some geeks on zero hour contract located in a glass building and several business method patents on the best orientation of the customer's arse for a wallet penetration? So I can do the same in Ireland?

        What you are suggesting is wonderful in theory. It would have also worked in practice if there were no trade marks, business method patents, design patents and software patents. Unfortunately, we live in a world where all of these exist, so a large enough company can easily form a subsidiary in a tax-optimized location, move key IPR + trademarks there and pretend that the value is created there.

        You cannot touch that either as it is _REALLY_ licensing the shape of the genius bar and the inclination of the consumer arse. Business methods are patentable in USA and USA is doing its very best to make the rest of the world fall in line for this exact reason. You can suck a business method patent out of your finger in an afternoon and that is all you need in order to set-up a bullet-proof tax avoidance scheme.

        This is different from the widget being real (f.e. expressed in real technical patents). IMHO, the biggest 9 inch blade that can be stuck in the back of tax avoidance is not via Tax law. It is via patent law. Just ban software, design and business method patents. This will pull the rug from under 95%+ of tax avoidance schemes.

    2. Anonymous Coward
      Anonymous Coward

      Re: Submit Offshore Tax Returns

      This sounds fun.

      I also think it would be fair to link protection of company assets, like intellectual property, to proof that said company is actually paying its fair share of taxes....

    3. Version 1.0 Silver badge
      Thumb Down

      Re: Submit Offshore Tax Returns

      Most of the ideas here sound like armchair accountancy - the way it really works is like this:

      You are making a product (it doesn't matter what) and selling it in two countries with different tax laws. At the end of the tax year your accountant sits down and works out how to shift the income to the county with the lowest tax (it's call "invoicing for services"). The entities in each country exchange small white pieces of paper (invoices) and your pile of green pieces of paper grows larger.

      Ah but, you say, what happens to the pile of green paper is in the "wrong" country? I'll leave that as an exercise for the reader but trust me on this - that's easy to fix, have you never heard of "investments"?

  6. frank ly

    Get expert advice

    When politicians and civil servants are drafting tax laws, they should engage 'domain experts' to point out to them how the laws can be bypassed. We've seen, time and time again, how the intent of tax laws are simply bypassed. It's almost as if future corporate tax lawyers and accountants are running governments.

    1. Kubla Cant

      Re: Get expert advice

      The problem is that the best experts are all hired by the multinationals.

      It's essentially an endless churn cycle. Tax experts spot a loophole and advise their clients to exploit it. The government acts to close the loophole, but by the time they do the tax experts have a new loophole ready.

      The only way for a country to ensure it gets a fair slice of a multinational's tax is to levy taxes at competitive rates. That way it becomes the haven where the taxes are eventually paid.

  7. jonnycando

    Well, we are talking about taxes,

    and where taxes are concerned if there's a way to dodge them, they will be dodged. However, as to the availability of loopholes, it is the government entity that writes the tax code that make those loopholes available, on purpose, or by failing to foresee the ways accountants may devise to dodge said tax!

  8. Anonymous Coward
    Anonymous Coward

    The problem is that it is hard to calculate "profits" on the web

    If you are selling products it is easy. For items being sold at retail, the difference between the wholesale price and retail price, less expenses, is your profit. So it is going to be pretty hard for a company like Apple or Amazon to leave much dispute in what their profit is, unless they are throwing in expenses that should not be counted against sales in Australia.

    For a company like Google, who makes their money from paid search ads, it is a lot more difficult. If you have an Australian based company placing ads to appear only in Australia, the revenue line is pretty simple. But what are the costs, especially if the servers are located in another country? For an Australian company placing ads to appear in many countries that may or may not include Australia, or a multinational placing ads to appear in many counties including Australia, just determining the amount of revenue that should be accounted for in Australia will be difficult, and calculating the expenses even more difficult.

    In such a situation, how can Australia's tax authority go to Google and claim Google is underpaying, let alone try telling Google what they should be paying? I'm not saying they shouldn't try to make it more fair - if evidence suggests Google has revenues of a half billion dollars in Australia (just an example, I have no idea) but pays only $1 million in taxes, that sounds a bit suspicious given their margins reported in US filings. The trick then is to figure out how they are unfairly padding their expenses, and make what is currently legal but unfair illegal.

  9. TVU Silver badge

    'Google tax' already being avoided, says Australian Tax Office

    Then one of the possible options is to make the scum of the Earth tax planners jointly liable for any paying back due tax owed when a scheme (read scam) is deemed to be tax avoidance or by levying punitive fines on these tax planning companies when they have been found to have done wrong should serve as a deterrent.

  10. Version 1.0 Silver badge

    Easy Fix

    The easy fix is to realize that there is no way to actually "stop" this going on - it exists because different locations treat the same item differently. We all talk up the benefits of a global economy but the reality is that we actually have a lot of small economies, each with its own tax and revenue structure - we're not "global" at all.

    It's a law of the dismal science that where there's a price disparity, there's someone making money from it - that's fine, but you have to apply the law of government too - where there's a tax, there's someone avoiding it.

    Realistically the only way to deal with this is to tax wealth - oh dear, but we can't do that can we... Rich people complain too much and employ lawyers to fight it - it's so much easier to tax poor people.

    1. whoseyourdaddy

      Re: Easy Fix

      "it's so much easier to tax poor people." -- no truer words were ever spoken.

      Why are US business tax rates topping out at 35%? When you pass higher taxes on a corporation, they find ways to mitigate the increase (like offshoring profits.) Sure, we give them breaks on adding new jobs and such. In the end, they still have to increase their profits or their share value won't go up, that my 401k is invested in.

      When you pass higher taxes on families, they have evil fantasies of trapping their legislators in a raging car fire. Corporations don't vote...directly.

      The Irony is in the late 90's when Dick Armey proposed a simple tax system in the US, he made the fatal mistake of calling it the "flat tax". Anyone who considered themselves disadvantaged rendered this dead. "I don't want to pay the same tax rate as the rich." But, with a standard deductible, it goes back to being a progressive tax that everyone thinks they want.

      The thing about simple taxes is, along with the complex tax forms, no more "social engineering" credits.

      Healthcare, Mortgage, Marriage, education deductions? Already factored in. Can't help the housing industry as you can no longer penalize those who rent instead of own.

      The US tax code demonstrates all we can do is play "musical loopholes".

      A large problem with adopting a simple tax code: you can bsh those changes on a 15 second TV ad. Not something "progressives" want to face.

  11. herman

    Sales Tax

    This is why a Sales Tax is much better for taxing businesses.

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