Google searched and Apple watched in ATO tax audit

Apple, Google, and Microsoft have all admitted that they are being audited by the Australian Taxation Office.

Three major tech companies giving evidence at a Senate inquiry into tax avoidance have confirmed that they are being audited by the Australian Taxation Office (ATO).

Executives from Apple, Google and Microsoft, under questioning at the hearing in Sydney on Wednesday, confirmed that they are being investigated.

Google Australia managing director Maile Carnegie said the company made $58 million in revenue in 2013, and profits of just more than $46 million, but paid $7.1 million in tax.

But 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," Carnegie said.

"It's very easy to underestimate the risks and also the costs that are required ... to develop that intellectual capital."

Carnegie said the next type of innovation, like a driverless car, is made possible by that research and development.

"The explanation for why an Australian multinational, whether they be in mining or in biotech, is able to generate the majority of their revenue outside of Australia but pay the majority of their taxes inside of Australia is that the Australian-based headquarters does most of the investment and carries most of the risk," she told the hearing.

"That explanation is also why Google pays most of its taxes in our US headquarters, because the US headquarters is where the majority of our costs are borne."

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

Apple's Australia managing director Tony King said that Apple Australia is entirely owned by Apple Ireland, but insisted that the company does pay tax in Australia, and claimed not to know of the so-called double Irish Dutch sandwich process of minimising taxation for multinational corporations.

Earlier, Tax Commissioner Chris Jordan continued to refuse to reveal the identities of a number of companies suspected of avoiding tax by shifting billions of dollars offshore.

"Firstly, we do what we can now with our current law ... to challenge the assertions, behaviour, and operating principles of some individuals and multinational enterprises, including ensuring that profits are taxed where the economic activity takes place and where value is created," Jordan told the hearing.

Jordan said that there are currently 69 "higher consequence taxpayers" accounting for 42 percent of the revenue of the entire corporate tax base.

Committee chairman Sam Dastyari had written to Jordan on Tuesday requesting that he reveal the names.

But Jordan refused, and in a response sent to Senator Dastyari and tabled at the hearing on Wednesday defended the decision on the grounds that naming the companies would undermine public confidence in the tax system.

"The treasurer has been consulted about making these PII [public interest immunity] claims, and has endorsed them being made by me as an independent statutory office holder. The grounds of the PII claim are as follows," the letter said.

"Disclosure of the information will have a substantial adverse effect on the proper and efficient operations of the ATO, contrary to the public interest."

With AAP