American Express has now paid no net income tax in Australia in eight years. EBay persists with its financial structure entirely contrived to shirk out of paying tax but Google … lights, trumpets, drum-roll … has finally flagged it will close down its central tax avoidance artifice.
Yes, multinational profit reporting season is upon us. All those December year end companies are filing and the early signs are that shame is proving only a partially effective form of corporate regulation. Shame, it seems, depends on the capacity for executives and their auditors to feel it, and in the case of eBay, Amex and the big audit firms, it doesn’t seem they do.
At least Google has foreshadowed a step in the right direction.
The financial statements for EBAY Australia and New Zealand Pty Ltd show revenue of $40 million for 2015, a fraction of the real income the group makes running Australia’s dominant online auction sites eBay and Gumtree.
The billions that this company has raked in from Australians over the years is booked straight to Switzerland, perhaps Germany too; it is impossible to tell by reading this pitifully thin and illusory set of accounts, audited by PwC. EBay’s costs, as usual, are relentlessly lobbed into the Australian operation, so its salary bill was $21 million last year, just over half of its the bogus income figure.
This has been the Google trick for many years, and others in the digital new-guard mimic it, too. Like eBay, the income Google Australia legalistically books in its local accounts is almost all from its related companies overseas, while the sales it actually makes from selling its services to Australians it siphons offshore to low-tax jurisdictions; Singapore for Google, Zurich for eBay.
But Google has, and it deserves plaudits for this, announced it will book its Australian sales in its Australian company from now on. It has also belatedly recognised that the tax it pays is the number in its cash-flow statement, not its P&L.
Hence last year it parted with $16.7 million in income tax on revenues of $502 million. Bear in mind that this revenue is from three related Google entities overseas, purportedly for providing technology services, whereas the amount Google makes from its main business here, selling advertising services, is thought to be north of $2.5 billion.
Google was unable to confirm yesterday whether, in line with the intentions of last year’s multinational tax avoidance legislation, it would be preparing General Purpose financial statements rather than the skimpy Special Purpose variety (which don’t deign to disclose related party deals).
At least Google has foreshadowed a step in the right direction though. Its dodgy digital peer, eBay, reported revenue of $40 million (almost all from related parties) and paid a measly $284,000 in tax.
Rather than addressing this sham of a corporate structure, hauling it into the Federal Court and prosecuting it under Part 4A of the Tax Act, the Tax Office has an arrangement with eBay where eBay dobs in its small time traders for skimping on tax.
Here is a company that, along with its lawyers and bankers, treats a heavily pregnant single mother with the utmost aggression and disrespect, crying foul she has ripped it off, when in fact it is breezily ripping off every man, woman and child in Australia.
In its Supreme Court statement of claim against former contractor and single mother Dana Joab, eBay, even has the cheek to include GST in its calculations of loss when it doesn’t pay GST.
Then there’s the usual duplicitous description of its business activities: “The principal activities of the Company during the year were the recommendation of market penetration strategies, advertising and promotion activities,”
Recommending “penetration strategies”, que? Its real business activity is putting Australian buyers and sellers together on its auction sites in Australia and selling advertising around it, in Australia.
The only positive aspect in all this is that, unlike FaceBook and Twitter, eBay has not won an exemption from the corporate regulator from revealing its accounts altogether, on grounds it is too small a company.
Then there’s Amex. Over the past eight years, the global financial services giant has disclosed revenues of $8.95 billion but – thanks to its grand total of $1.7 million tax paid in 2015 – managed to realise a net income tax gain over eight years of $2.6 million.
“Service fees” are the major culprit. American Express restructured in 2004 and the upshot was to substantially lower the profit it books in Australia by ripping out billions in credit card receivables to a shadowy partnership domiciled in the picturesque tax haven of Jersey.