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Google, Facebook Learning How To Handle New Oz Tax Rules

Getting US technology-based companies including Google and Facebook to pay more in local tax for their Australian operations is proving difficult, it seems, despite the introduction of new rules under the Government’s Multinational Anti-Avoidance Legislation (MAAL).

Google and Facebook have reported only a third of their estimated Australian revenue under the first year of the Multinational Anti-Avoidance Legislation, while also slashing payments made by some of their overseas entities to their local operations for services, according to an Australian Financial Review report.

Advertising sources told the Fin that more than $2.5 billion of Google’s Australian revenues are paid directly offshore, with Facebook close to $1 billion. Both companies in their accounts have stressed that MAAL applies only to “sales contracts managed by the sales team in Australia”, as Google put it.

With MAAL coming into effect from January 1 last year, Google Australia reported $882 million in advertising revenue which previously had been booked to Google Asia Pacific in Singapore.

But  Google Oz also reported a $248 million lift in the cost of providing services, plus $228 million in sales and marketing expenses and another $95 million in general administrative expenses, a total of $572 million in new costs against the new ad revenue.

At the same time, payments that other Google entities made to Google Australia were slashed back, from $498 million to $220 million – a fall of $278 million.

The combined effect of the fall in services revenue and the new costs wiped out most of the new ad revenue that MAAL had picked up, the Fin says. Google Australia was up only a net $32 million at the end of these exchanges.

Facebook Australia saw a similar dramatic change with $327 million of revenue brought to account, while $33.7 million that related companies paid the Australian arm was reduced to zero. It also reported higher costs of $280 million. Tax paid was up – but not perhaps as highly as the ATO had hoped, rising from $1 million to $3.5 million.

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