Google warns against Australia going it alone on tax

Google has advised the Australian government against going it alone on targeting multinational tax avoidance.

Google has told the Australian parliament that it would prefer issues around taxation of multinational corporations to be dealt with by the G20 or the Organisation for Economic Co-operation and Development (OECD), rather than have individual countries attempt to go it alone.

The Australian government is attempting to tackle profit shifting by multinational companies such as Google, with the Australian Taxation Office (ATO) focusing its efforts on investigating whether profits earned within Australia by some of the largest tech companies are taxed within Australia.

The Senate Committee on Economics is also looking at the regulatory environment that has allowed multinational corporations operating in Australia to practice tax avoidance and "aggressive minimisation", and how it can be addressed.

Google, as one of the most high-profile examples often cited in discussing the issue, has told the committee in its submission that globally, Google pays billions of dollars in corporate tax every year, and its corporate tax rate in 2014 was 19 percent.

In Australia, Google said it invests AU$300 million each year, employing 500 engineers, some of whom are working on research and development projects.

The company said that countries around the world create tax incentives for multinationals like Google in order to attract foreign investment, and Google is "exactly the kind of innovative, risk-taking company that many governments are seeking to incentivise through their tax regimes".

The company said its success has been built on a series of "big bets", including the launch of Google search, Gmail, Chrome, Android, and YouTube, and other less successful ventures including Knol and Glass. Google said that it should pay the most tax where the most risk is taken, but said that tech companies are incorrectly singled out during tax debates.

Google's Australian-developed Maps product was omitted from the submission.

"The transition to a digitally enabled economy has made it easier for businesses to deliver services across borders, and this global capability contributes to economic dynamism and growth for businesses of all sizes."

Google argued that any change to Australian taxation law could lead to other nations following suit, which might impact Australian multinationals operating in those other countries.

"The only way for every country to gain would be to see the same dollar of profit taxed twice," Google argued.

"Governments must harmonise tax rules so that digital tools continue to create value in Australia and overseas. Fragmentation along country or industry lines puts this value at risk."

It comes as US President Barack Obama has pitched in for a 14 percent tax rate on offshore profits earned by US companies repatriated into the US.

Google argued that the OECD is the best place for countries to develop a multinational approach to tax harmonisation, and would avoid companies being taxed twice on the same profit.

The Institute of Public Affairs disagreed that the OECD would be the best place to deal with the issue. It said that the OECD represents 34 "mostly high taxing" nations that have an interest in securing revenue against competition from other nations. The libertarian think tank labelled the focus on tax avoidance as "a dangerous mixture of extreme confusion and moral outrage", and suggested that there is no evidence that Australia's company tax base is eroding.

The ATO, in its submission, noted the complexity of investigating multinational profit shifting -- one case took six years to resolve. The office noted that tackling profit shifting could see companies restructure their organisations to get around any new rules put in place by the government.