​Google Australia upped its taxes in 2014

Amid ongoing scrutiny from the ATO, Google Australia has revealed that it upped its tax expense substantially in 2014, paying AU$9.4 million, or 16 percent, of its pre-tax profit for the year.

Google Australia reported profit after tax for the year ending December 2014 of AU$49.3 million, slightly up from the previous year's result of AU$46.1 million -- a 6.4 percent increase, according to the company's latest financial filing.

The internet giant's local arm, which lodged its annual financial statement with the Australian Securities and Investments Commission (ASIC) on April 30, reported revenue for the year of AU$438.7 million, up from the previous year's AU$357.7 million, while its before-tax profit was AU$58.7 million, up from the previous year's AU$46.5 million.

Google Australia reported an income tax expense of AU$11.7 million -- almost 20 percent of pre-tax profit -- for the year, and an additional AU$2.6 million adjustment for the prior year.

However, AU$4.9 million of that total figure was deferred, leaving the company with a AU$9.5 million tax expense for the year. This represents just over 16 percent of its pre-tax profit, and was a substantial increase over its income tax expense the previous year.

For 2013, Google Australia reported a AU$7.1 million tax expense, or 15 percent of its pre-tax profit, but AU$6.6 million of this was deferred, leaving a total income tax expense of AU$466,802 -- around 1 percent of pre-tax profits for that year.

The company also reported a AU$4.9 million tax concession from the government's research and development incentive scheme in 2014.

The substantial boost in Google Australia's tax expense as a percentage of its pre-tax profit comes as the Australian Taxation Office (ATO) investigates the company, along with several other large corporations, for its tax treatment in Australia.

It emerged in early April, during a public hearing of the Senate inquiry into corporate tax avoidance, that three of the largest tech companies operating in Australia -- Google, Apple, and Microsoft -- are all being investigated by the ATO.

The three companies, among several others, have been under the watchful eye of the government due to the amount of corporate tax they habitually pay in Australia, which is generally much lower than the going 30 percent corporate income tax rate in the country.

While readily available concessions such as Australia's research and development incentive allow local companies to pay less tax, it is the employment of the so-called Double Irish-Dutch Sandwich process, and similar processes of minimising taxation for multinational corporations, that have caught the attention of local authorities.

In Google's case, the company's search business is billed in Singapore, which has a corporate income tax rate of 17 percent, with Google Singapore provided with sales and marketing services by Google Australia.

During the Senate committee hearing in April, Google Australia managing director Maile Carnegie said the majority of the company's taxes were paid in the US, because that is where the global headquarters is based, where the company generates the most investment in research and development, and where it undertakes the most risk.

"And that in turn is what drives our profits," she said. "It's very easy to underestimate the risks and also the costs that are required ... to develop that intellectual capital."

Google Australia's latest financials follow hot on the heels of IBM Australia's 2014 results, which reported a 37.5 percent drop in net profit after tax to AU$145.9 million for the year ending 2014, compared to the previous year's result of AU$233.2 million.

IBM Australia's total tax expense for the year was AU$45.17 million, around 30 percent of its pre-tax profit, but AU$36.51 million of that was deferred, leaving its income tax expense for the year standing at AU$8 million, representing around 5.2 percent of its pre-tax profit.

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