For a company that is able to target ads with a level of granularity best described as fear-inducing, it comes as a shock to learn that the same company seems to throw its revenue into a giant pot in Ireland, and doesn't scrutinise from where it was derived.
But such was the line proffered by Facebook vice president of tax and treasury Ted Price to the Senate Economics Committee looking into Corporate Tax Avoidance on Tuesday.
Of concern to the committee was AU$326 million in revenue booked by the company in Australia, which it learned was the number derived from Facebook's local sales team in Sydney and Melbourne, and did not include Australian companies or people who bought ads on the social site without interacting with the local sales arm.
For the full effect, we head to the transcript where Senator Chris Ketter was quizzing Price.
Ketter: So there is revenue generated from Australia that is not supported by your Melbourne and Sydney offices?
Price: That is correct.
Ketter: Can you tell us how much that is?
Price: I don't have those specific figures; we don't look at those figures on a country-by-country basis. It's not a way in which we track them.
Ketter: Can you take it on notice?
Price: Yes -- I think we can get that information, but I am not familiar with our systems. Again, it's not something we routinely track on a country-by-country basis in all the locations where we operate.
Later in the hearing, the Australian Taxation Office (ATO) explained that it is completely OK with Facebook not knowing this information for one simple reason: It isn't against the rules.
Once again, we need to head to the transcript where Ketter was leading the questioning of ATO deputy commissioner Mark Konza:
Konza: There are ecommerce players that we've reviewed -- we've reviewed a couple of hundred cases in the MAAL [multinational anti-avoidance laws] -- and over a hundred of them, we've said you got no MAAL liability. Many of those cases were companies which we know are operating on the internet with Australian customers, but they have no presence in Australia.
Ketter: But Facebook does have a presence in Australia.
Konza: And under the MAAL, they have a presence in Australia and the sales that that presence directly supports must be returned in Australia -- that's how the MAAL works. It says if you have sales that are going offshore, and you have activities in Australia, and those activities directly support those sales, then you must return those sales in Australia.
However, the converse must also be true, obviously, senator, and that is if you have some of your sales which are not being directly supported, then you are under no obligation to return them in Australia.
That said, Facebook is currently under audit by the ATO for most of the time it has had operations in Australia, Price told the committee.
Microsoft able to have 'deeper connections' with customers thanks to Australian government tax changes
While Facebook is undergoing an audit, Microsoft said on Tuesday it had completed its multi-year audit that very morning.
Maybe the joy of the moment found its way into the company talking points, but whatever it was, Microsoft Corporate vice president of Worldwide Taxes Daniel Goff was in no doubt that the Australian multinational tax avoidance laws are nothing but good news for the local outpost.
To not read the entire Goff exchange with Senator Jane Hume of Victoria would be missing out.
Goff: Our tax structure is [now] designed to simplify our structure, to create flexibility, and to enable our business. Allowing there to be local revenue and expenses allows our Microsoft Australia entity to get really close to the customer, and really help the Australian customer with their own digital transformations.
So this model is going to allow a lot of flexibility so that we can do a lot more things in Australia, which I think is really good for the Australian consumer.
Hume: I thought the buy-sell model was more about transparency, as opposed to consumer benefits.
Goff: There is some benefits to transparency, as the P&L for the entity will show the revenue and the cost of sales, but I think from my perspective, the real benefit is it allows a lot more flexibility in terms of what the local subsidiary can do in terms of engagement with the local customer.
Hume: You've got to forgive me, I studied accounting at university and like a bad transplant, it didn't really take, and I know that my colleagues here are not tax experts either, but I cannot see the benefit between a transparent accounting system and the benefit to a consumer.
I can see it would be a benefit to the tax office, I can see it would be a benefit to the government in terms of its revenue take, but what is it for the consumer?
Goff: To your point, I don't think it is an apples and apples comparison, the benefit to the consumer is what I just said, it allows us to have much deeper connection with the local customer in terms of what our sales force in Australia could do.
Under a commission model, where you are just acting as a sales and marketing agent, it's more of a facilitator for another legal entity, removing that engagement into the local subsidiary which is going to allow a much deeper connection with our Australian customer.
Hume: Thank you Mr Goff, I look forward to seeing how that deeper connection plays out.
As do we all, senator.
The truly strange part of Goff's assertions that the company is much better off under this new model is that after the ATO conducted its audit, Microsoft Australia has moved from a model of having 15 percent of every AU$1 in revenue in Australia subject to tax to now having 20 percent of every AU$1 being subject to Australian taxation.
At this rate, one does wonder how flexible Microsoft could be if it was fully nationalised.
Google: The multilingual hub of Europe is an emerald isle in its far west
One of the more schadenfreude-inducing moments of Tuesday's hearing was listening to representatives of multinational companies attempt to justify why they chose to locate in certain countries, not wanting to mention tax -- but when you get to the nub of it, everyone knows low taxation is the actual reason.
So it was that Google director of international taxation Damon Richardson regaled the hearing with how Google ended up in Ireland.
"Two years ago, your Australian managing director told us that the corporate structures are not set up to minimise tax, they are set up to be competitive with your major competitors," Ketter said. "So I took that to mean if Apple, Microsoft, and Facebook used low-tax jurisdictions, then you would have no choice but to follow suit, is that your position?"
"When we look at regional headquarters, there are a number of factors that go into where we decide to put our regional headquarters, and one of those factors would certainly be tax," Richardson replied.
"When I look at Singapore, as an example, there were many reasons why, aside from tax, that we did end up putting our regional headquarters in Singapore -- whether that's the ability to have folks there who are speaking local languages or whatever it may be, there are a number of factors that play into why we are landing there, and from a legal perspective, legal reasons why to land in certain jurisdictions as opposed to others when we decide where to put regional headquarters."
To be fair to Richardson and Google, Singapore is a fine choice for a regional headquarters, and it is far from alone in locating there -- however, Ketter continued:
"Apart from the company tax rate in Ireland, what are the other reasons why you locate there?" the senator asked.
"In relation to Ireland, Ireland is an entity or a jurisdiction where we need -- because of how our business operates -- we need people to speak a multitude of languages. I believe there is in excess of 20 different languages that are spoken in our Google Ireland Ltd entities," Richardson retorted.
"So, if I even back up further, there is 6,000 people who sit in our operations there who are primarily working to serve our advertisers across the European region. So if you can imagine that there is a situation where an advertiser in Spain, or an advertiser elsewhere in the region who doesn't speak English, needs to get in touch with Google, having the ability to have a centralised hub where those customers can call someone, and that is what we have set up in Ireland."
At this stage, I would expect many geographically aware observers to be thinking of a dozen or so nations in Eastern Europe that could be better placed to serve as multilingual hubs for multinational companies, but there's always that thorny issue of taxation rates.
Full marks to Ireland, though: Of the companies present at the hearing, the amount of research and development that is funded out of that country is truly staggering. Most had an arrangement where there is one R&D fund for the US/western hemisphere, and another fund for the rest of the world powered out of Ireland.
But things were just starting to get weird, because we were about to learn that one of Google's Irish companies is actually parked in the Caribbean, and it's the one that holds Google's valuable intellectual property rights.
It's time, once again, to head back to the transcript.
Ketter: Why do you use Google Ireland to house the intellectual property?
Richardson: There's two different legal entities: Google Ireland Ltd and Google Ireland Holdings. So Google Ireland Ltd is the entity that houses the 6,000+ employees, plus it's the one that essentially serves our business in terms of the customer-facing entity.
Google Ireland Holdings is the IP-holding entity.
Ketter: OK, and my question was: Why was that in Ireland?
Richardson: Why is the Google Ireland Holdings entity in Ireland? So the Google Ireland Holdings entity is an Irish corporate entity, but it is tax resident in Bermuda. And so part of the reason that we look at that, why we did that particular structure, it's something that the Irish rules allowed for, it's something where a lot of companies looked at Bermuda, and have set up operations in Bermuda, and when we set up our structure back in the early 2000s, it was a jurisdiction that we too looked to in order to set up entity where we are going to be having our intellectual property held for the non-Americas region.
Ketter: So you are tax-resident in Bermuda, so there is obviously further tax benefits following from that?
Richardson: The tax rate in Bermuda is zero percent tax rate. The tax rate in Ireland is a 12.5 percent tax rate. So we have a portion of our profits that are taxed in Bermuda, and a portion that are taxed in Ireland as a result of the fact that you have again the substantial operations that are there.
In the last year, Google said it had restructured its business so that all Australian customers on all its products are billed through Google Australia -- with the exception of its Play Store.
Don't worry, though, Singapore and Ireland still get their cuts from every dollar, and it might even make its way to Bermuda.
The committee is currently set to deliver its report into corporate tax avoidance on September 30.