by Byron Connolly

Tech companies to face tax crackdown

May 11, 20153 mins

Treasurer Joe Hockey will release draft laws dealing with tax avoidance by 30 multinational companies in the federal budget tomorrow.

Hockey told reporters in Canberra on Monday that these companies are diverting profits earned in Australia to no-tax or low-tax jurisdictions.

Technology companies that use these schemes to reduce the tax they pay in Australia are likely to be hit by the government’s proposed ‘Multinational Anti-Avoidance Law.’

Hockey didn’t name specific companies that could be slugged. However, a recent Senate inquiry into tax avoidance has seen the tax practices of Apple, Google and Microsoft come under scrutiny. All three told the inquiry last month that they were being audited by the Australian Taxation Office.

The inquiry by the Senate Economics References Committee is examining the adequacy of Australia’s tax laws and whether these technology companies are paying their fair share of tax in Australia.

Mr Hockey would not disclose a figure the government was hoping to recover under its crackdown.

“I am not going to make the same mistake that Labor made and bank money that is not identifiable,” he said.

Hockey said that after months of the ATO being embedded in these businesses, the government now has a better understanding of how these companies have used contrived or artificial tax arrangements such as a the ‘Double Irish Dutch Sandwich.’ This refers to tax minimisation strategies that were raised during the Senate hearing last month.

Last year, Apple reportedly paid $80 million in tax on $6 billion in revenues in Australia. The company posted a profit of $250 million. Google’s Australian operation paid $7.1 million in tax on reported revenues of $358 million in 2013.

The draft laws will be released at the time of the federal budget on Tuesday.

Meanwhile, Hockey announced that digital downloads – including movies from services like Netflix, games and e-books, will be subject to the GST under new laws. He said the laws would level the playing field and raise $350 million over the next four years, all of which would go to the states.

“It is plainly unfair that a supplier of digital products into Australia is not charging the GST whilst someone locally has to charge the GST,” he said on Monday.

Additional reporting by AAP.

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Follow Byron Connolly on Twitter:@ByronConnolly