Airbnb argues boost to economy makes up for tax evasion

Airbnb has found itself in the spotlight on Wednesday, when a Senate inquiry into the tax avoidance of multinational companies probed the online accommodation startup, demanding an explanation of where the money paid in Australia was going.

Sam McDonagh, Airbnb Country Manager Australia and New Zealand, said the service results in guests injecting money into the community and often staying longer than a typical tourist would, adding that although Airbnb continues to grow, typical hotels have also experienced a rate increase.

McDonagh said an average of $7,100 is earned by Airbnb hosts per year, and it is assumed that hosts pay their required tax in their locality.

Chairman of the inquiry, Labor Senator Sam Dastyari, dismissed the insinuation that injecting money into the economy removed an international business from the responsibility of paying tax onshore.

"You can be a business that contributes to an Australian economy that pays tax; they're not mutually exclusive," Dastyari said. "In fact, we encourage you to do both."

Dastyari verified with McDonagh that if he were to log on to Airbnb and book a place to stay in Western Sydney -- which was flagged in McDonagh's opening remarks as growing at a rate of 450 percent -- that the transaction would occur in Ireland.

McDonagh said that all Airbnb transactions within Australia do move through the Ireland-based platform, as Airbnb Australia Pty Ltd is wholly owned by Airbnb Ireland.

Airbnb was estimated to be worth approximately $25.5 billion in June, with the valuation placing them above hotel giants Marriott ($20.90 billion), Starwood ($14 billion), and Wyndham ($10.01 billion), and just behind Hilton Worldwide -- valued at $27.7 billion.

According to McDonagh, 84 percent of Airbnb hosts in Sydney are listing their primary residence; the platform also has 2 million global listings and over 50,000 unique listings in Australia.

McDonagh confirmed that a host who puts a space up for a guest receives their payment directly from Airbnb Ireland, and they see roughly 97 percent of the transaction paid by the guest.

"There's no point harping on about this, I think this is a significant tax area that we have to look at internationally," Dastyari said.

"I think there is a tax structure that has been frankly, on how we tax, that has been built on a very 1970s model of what is permanent. I do not dispute that you are not doing anything different to what others like Google have done in the past, but you can understand from an Australian policy perspective why we'd say that this is something that needs to be looked at internationally, if these are transactions that are not officially taking place on Australian soil -- for tax purposes."

Earlier this year, the Senate inquiry found AU$31 billion was funnelled to Singapore within a year by 10 multiinternational companies.

In April, executives from Apple, Google, and Microsoft confirmed they were being investigated by the Australian Taxation Office (ATO) as part of the Senate's tax avoidance inquiry.

Much of Google Australia's revenue from advertising is actually taxed in Singapore, where the tax rate is much lower -- a practice also employed by Microsoft.

Meanwhile, Apple Australia Managing Director, Tony King, said that Apple Australia is entirely owned by Apple Ireland, not dissimilar to Airbnb, but insisted that the company does pay tax in Australia.

He claimed to not know of the so-called "double Irish Dutch sandwich" process of shifting profits to low-tax countries -- a practice in which Apple has previously been accused of engaging.

Brad Kitschke, director of public policy in Australia and New Zealand for Uber, also appeared in front of the committee on Wednesday, arguing that Uber was not avoiding paying tax, despite its headquarters being in the Netherlands, where, like Ireland, the tax rate is considerably less than that of Australia.