ATO to Investigate Tech Companies

Just a day after Opposition spokesman Malcolm Turnbull questioned why Google paid a meager amount for tax, the Australian Tax Office announced that it is keen on finding out how much should tech companies pay for its revenues from the Australian market. 

Group M estimated that social networking site Facebook is likely to earn as much as $55 million in advertising from Aussie users. The revenues, however, will be billed through Facebook Ireland where the commercial tax rate is much lower compared to that in Australia. 

If one takes into consideration the revenues Facebook gets from its gaming apps, sources say Facebook’s Australian business may have yield as much as $100 million. About 11 million Aussie users are on Facebook. 

But because Facebook does not file its accounts in Australia, no one really knows for sure how much the company earns and no one can accurately determine how much tax it should pay the Treasury. 

Facebook currently employs about 30 staff in its Sydney office. The staff is mostly in charge of sales. 

Search engine giant Google also uses the same practice of billing Aussie users through its Irish subsidiary. Google allegedly pay only $74,176 in tax from revenue of $201 million, a paltry amount. 

If a new legislation will be passed, this will provide tax auditors more power to examine tech companies and its subsidiaries to accurately determine how much these companies should pay in taxes. 

One caveat, however, is that these companies can argue that they should be exempted from paying taxes as they operate like offshore online retailers. Another argument that can possibly arise is that these companies are not directly selling to Aussies.