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Profit in Australia. Taxed in Australia

There is a widespread opinion that large multinational companies are extremely effective in minimising their tax obligations in Australia. This is mostly true as companies such as Facebook and Uber are able to shift their intellectual property and create inter-company loans to ensure profit is realised in tax effective environments. It is almost as if these companies are here everyday but manage to run away as soon as the tax man comes knocking. Or at least that used to be the case.

Recent news would suggest the ATO is close to finishing their impenetrable triple bolted titanium door which is designed to stop these companies from running away with all their cash stashed in their pockets.  

The most recent company to be stopped by this door is Google. At the end of 2019 Google settled a $481.5 million tax bill with the ATO. This settlement took over a decade to finally conclude. But it looks like Google didn’t only have tax problems in Australia. The company also recently went through a settlement in France which cost them a whopping $1.5 billion. Perhaps the world has finally had enough and are banding together to put an end to multinationals tax evading practices.

So, while this may seem like a great win for the Australian Tax Office, was it worth is? Some would suggest the taxing multinationals in Australia would reduce the other benefits they provide the country. For instance, Google employs thousands of Australians and there is no doubting the brilliance and usefulness of its online platform. So, will taxing the company in Australia entice the company to reduce their operations here? I suppose you would have to look at this case by case and determine the pros and cons.

Another important note is the effect high taxes may have on start-up companies. A large cyber giant like Google my be able to afford the half a billion-dollar tax bill in Australia as relative to its income this expense is affordable. Google is also not trying to expand as it is already very well established in Australia. But a start-up on the other hand may choose to begin and operate overseas in more tax effective environments. Unfortunately, this would mean that Australians (and the tax office) would forego the potential benefits this start-up could create in the country.   

The reality is, there are pros and cons of taxing multinationals like Google at high (yet consistent) rates. We should also put our faith in the economists and politicians who determine the best approach in determining company tax. But as it stands, if you profit in Australia, you will be taxed in Australia.

Written for you by Chris Davies

The information contained on this website and in this article is general in nature and does not take into account your personal situation. You should consider whether the information is appropriate to your needs, and where appropriate, seek professional advice from a financial adviser. Taxation, legal and other matters referred to on this website and in this article are of a general nature only and are based on our interpretation of laws existing at the time and should not be relied upon in place of appropriate professional advice. Those laws may change from time to time.

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