As Australians face the prospect ofunder a new tax on "intangible" products, some of the biggest tech companies providing these services have faced increased scrutiny about the taxes they pay in Australia.
The Australian heads of Google and Apple as well as the vice president of Microsoft's Worldwide Tax division jointly appeared at a session of the Senate Committee hearing into Corporate Tax Avoidance in Sydney this week, and were compelled to answer questions about their companies' complex tax structures.
As the committee discussed complex profit shifting arrangements and the 'morality' of using legal loopholes to avoid paying tax, the question of "double Irish sandwiches with Dutch associations" led the questioning into near-obscurity.
However, at the heart of all the complex financial double-speak, committee chair Senator Sam Dastyari said that, ultimately, "the Australian public do not accept" that the financial structures of massive tech companies "are necessarily genuine."
"There is a strong sense out there that companies such as yours... [and] the structures that have been created within your firms -- be it through Ireland, through Singapore, through the US or through wherever -- have been designed to minimise your tax obligation in this country," he said.
Senator Dastyari was joined in his criticism by Greens Senator Christine Milne, who expressed frustration with tax systems designed to "maximise the costs here and to transfer as much as possible overseas and end up paying no tax on it at all."
Similarly, Independent Senator Nick Xenophon, called into question the tax havens that tech companies shift profits to, taking Google Australia Managing Director Maile Carnegie to task on the matter:
Senator Xenophon: When Bloomberg Business reports that most of the profits went to the tax haven of Bermuda...you are not aware of any of that?
Ms Carnegie: I am aware that Google has a relationship in Bermuda.
Senator Xenophon: What is the tax rate in Bermuda? Remind me.
Ms Carnegie: I am not aware.
Senator Dastyari: Zero.
Senator Xenophon: If I said it was zero, would that be right?
Ms Carnegie: I would not debate it. I would take it on face value.
Senator Xenophon: You are a senior executive for Google--their most senior executive in this country--and you are not aware that profits from Australia's operations somehow end up in Bermuda, where there is a zero tax rate?
Despite the extensive questioning, all three executives denied any wrongdoing.
Google's Maile Carnegie said it was up to the Federal Government to set the "right number" when it comes to what companies were obliged to pay, saying "we are not opposed to paying tax; what we are opposed to is being uncompetitive."
Similarly, Managing Director of Apple Australia and New Zealand Tony King, denied that the company had strategies in place to reduce its tax bill, saying it pays tax "in accordance with the Australian tax law."
However, King admitted that in its most recent financial statements, it paid $80 million in tax on $6 billion in sales, with only $250 million of its overall revenue actually taxable.
During the committee hearing it was revealed that both Google and Microsoft have a significant proportion of their Australian revenues taxed in Singapore -- in the case of Microsoft, AU$2 billion in revenues taxed in Singapore compared to AU$100 million in Australia. It was also revealed that all three companies were currently being audited by the Australian Taxation Office.
Apple and Google did not respond to a request for comment.
Update, April 13 at 9:45 a.m. AEST: Microsoft declined to comment.