Labor MP Ed Husic has said that, if technology companies want the government to invest in infrastructure like the National Broadband Network (NBN) and take steps to alleviate skills shortages, they need to pay their fair share of tax.
Husic was speaking in parliament this week on the Tax Laws Amendment (Cross-Border Transfer Pricing) Bill (No. 1) 2012 legislation that is currently before Parliament, seeking to change Australia's legislation on transfer pricing.
Transfer pricing occurs when two parties supply goods or services to each other and, by doing so, transfer profits from one another. For example, a company with an arm in Australia and one in a country with a lower company tax might have the Australian arm of the company buy goods from the other arm at an inflated price, or allocate income from the Australian arm to the other company at a discounted price, in order to reduce its tax.
There are already laws that make sure that such transactions are done at arm's length, for tax purposes. However, it still occurs that companies pay a lot less tax than many would think. There was an uproar earlier this month, when Google's Australian financial results showed that it had made a loss in Australia and, therefore, only paid $74,176 thousand in tax, even though it is said to have made $1 billion in revenues in the country.
The government is currently trying to put laws through parliament to clarify the transfer pricing rules, which Communications Minister Stephen Conroy said would help capture more taxation from companies like Google.
Husic said this week, while speaking on the Bill, that if companies didn't want to pay tax, they couldn't expect the government to fund initiatives that fostered the industry.
"I do not think it is right that you operate a firm within the sector, be concerned about, for instance, skills shortages, expect government to play a part in addressing these shortages, and then argue against moves to ensure that the sector is paying its fair share of taxation," Husic said.
"It is fair to point out that you cannot champion the phenomenally important investment in renewing this nation's broadband infrastructure, and then rail against moves to protect our revenue base that will, among other things, help fund this investment."
He said that, although the legislation was critical, the Organisation for Economic Cooperation and Development (OECD) would need to keep reviewing this area, as it was of international interest.
Turnbull, however, isn't certain that the legislation will have a big effect, as companies like Google and Amazon are able to transact directly with Australian customers from another country, like Ireland.
"It arranges its affairs so that its business in Australia, its permanent establishment in Australia, has no effective connection with that transaction and, therefore, there is no basis for the transfer-pricing rules to apply. Of course, the same thing can be said about Amazon."
Turnbull suggested that the government should consider levying a GST on those online services, which he said was feasible, despite concerns that it would cost more to put into place, than it would bring in.
He did, however, agree with Husic, on the matter of companies like Google backing Australia's NBN investment, while not providing the funding to make it possible.
"It is all very well for Google, paying $74,000 of tax in Australia, to be encouraging the Australian taxpayer to spend $50 billion on an NBN, of which Google will be an enormous beneficiary. But it is not contributing anything to the tax base here, to enable that investment to be made. Google would be more credible if it actually put its money where its mouth was," he said.
The Bill was passed on Tuesday in the House of Representatives.