Google, Facebook fall into line on tax, but eBay remains defiant


Michael West, University of Sydney

Under pressure from the Australian Tax Office, Google and Facebook have begun to bring their revenue onshore to be taxed. eBay remains recalcitrant, still deeming its Australian business to be a Swiss business and thereby avoiding millions in income tax and GST. The Conversation

It is multinational reporting season once again and the early signs are the government’s multinational tax avoidance laws are starting to work. But the world’s largest corporations are still paying a fraction of their fair share of tax in this country.

Until this year, Google and Facebook entertained a corporate structure that booked the billions of dollars of revenue they made in Australia directly offshore. However, eBay is still blithely pretending it doesn’t have an Australian business and that the billion dollars a year it makes from operating its online auction house in this country – through which Australians buy and sell things with other Australians in Australia – is really the business of an entity residing at 15 Helvetiastrasse, Bern, Switzerland.

According to its accounts, the latest for the year to December 2016, eBay Australia is still masquerading as being in the business of “the recommendation of market penetration strategies” on behalf of eBay International AG.

So it is that every cent of the $59 million that eBay disclosed as its cash-flow statement for 2016 came from related parties, mostly for “rendering of services”. On this, eBay paid $1.9 million in tax after ratcheting up its costs by $13 million to wipe out most of the $20 million uplift in cashflow. The average salary at eBay, if the accounts can be believed, is $312,553 – 109 employees, according to the directors’ report, getting $34.1 million.

Mind you, according to the directors’ report, these 109 people are engaged in carrying out the principal activities of the company, which are “the recommendation of market penetration strategies, advertising and promotion activities”.

Gobbledygook, but the numbers are irrelevant anyway. The estimated billion dollars or more which eBay is said to make in Australia is not even included in its financial statements, just the revenue from its secretive associates. Moreover the accounts are not consolidated, according to the notes, rendering the entire disclosure a farce. Auditor is PwC.

Funnily, though, the cover page Form 388, authenticated by EY, talks about “consolidated revenue” and “consolidated gross assets” – despite the fact that PwC says the accounts are not consolidated.

So eBay is the quintessence of the undisclosed agency, a puppet regime designed to whisk Australian profits offshore to a tax haven. The shadow directors are in Bern and the ultimate parent eBay Inc is in the US.

Over the past 15 years, eBay has dodged GST and paid income tax of just $8 million (almost one-fifth of its bill for “professional fees” at $38 million), despite its billions of dollars in cash-flow.

Positive signs of change

Focusing on more positive developments on the multinational tax scene, arch-tax avoider Google Australia and New Zealand is now recognising that a portion of the profits it makes in Australia are in fact Australian rather than Singaporean.

Industry observers believe Google makes about $3 billion in sales from its advertising business here. Until this year, its only revenue has come from three related parties via service arrangements. Now, with the introduction of the multinational anti-avoidance legislation, Google has recognised roughly one-third of its Australian revenue as Australian.

In the broader context it is worth considering the effect of the digital revolution on Australia’s tax base.

Where the TV networks, News Ltd (though belligerent on the tax front) and Fairfax Media once paid hundreds of millions of dollars a year in tax collectively, they are now struggling to make a profit. In their place, it is estimated Facebook and Google now pick up 80% of the advertising dollar in this country but they pay negligible tax.

Globalisation and the internet are similarly challenging Australia’s revenue base in retail, financial services and other sectors. Paypal, for instance, eBay’s corporate cousin, paid more than $1 billion of its $1.2 billion in revenues to its parent and associates in Singapore over the nine years to 2014 thanks to a “service agreement”.

Looking at the accounts, thanks to the new tax law, revenue rose from $498 million to $1.14 billion. Sales and marketing expenses, however, recognised for the first time at $324 million, knocked profits about. Profit rose from $50 million to $121 million on which tax expense was $16 million, up from $3 million.

Actual tax paid as per the cash-flow statement was $41 million, up from $16 million. So, like Apple, Google is beginning to pay significant amounts of tax, although still way short of the mark, and it appears to have bloated its cost base here as much as humanly possible. Assuming group sales are heading towards $3 billion (Google booked $882 million in advertising revenue), the real income tax number ought to have nine digits.

For its part, Facebook booked revenue of $327 million, ten times the $33.5 million recorded in the the previous year. After forking out $271 million to related parties for the “purchase of advertising inventory”, it made a profit of just $6.3 million on which it paid $3.4 million in tax.

Under its previous structure, Facebook sales were booked to an associate in Ireland. For the purposes of reporting as little as possible, the company even won an exemption from the corporate regulator when it claimed to be a “Small Pty Company Controlled By a Foreign Coy Which is Not Part of Large Group”. That its foreign parent was valued at more than $170 billion on Wall Street didn’t seem to matter.

Now, Facebook has declared itself to be a reseller of local advertising inventory. Both Google and Facebook are audited by EY.

None of these companies operate to maximise profits for the benefit of their Australian entities. All have small, token boards of directors. All operate in the interests of their foreign overlords and should be taxed as agencies.

It is a good thing the authorities are catching up with multinational tax lurks. This would not have occurred without public outrage and dissent. Nor would it have occurred without the Senate Inquiry into Corporate Tax Avoidance in 2015, which thrust the issues into public view. They should keep this Senate committee rolling with biannual investigations where corporate leaders are held to account and subject to full public scrutiny. After all, directors have a fiduciary duty to perform in the interests of their companies, not some tax officer in California.

Further, the architects of multinational tax avoidance – EY, Deloitte, PwC and KPMG – ought to be subject to greater disclosure requirements rather than operating as murky partnerships whose partners pontificate to government on tax policy while advising their big clients how best not to pay tax, or “leakage” as they call it in the trade.

Michael West, Adjunct Associate Professor, School of Social and Political Sciences, University of Sydney

This article was originally published on The Conversation. Read the original article.

Instagram Is Now Worth $35 Billion


TechCrunch

Citigroup raised the valuation of Instagram this morning from $19 billion to $35 billion.

The photo-sharing network recently announced it had surpassed 300 million active users, and has taken steps toward cleaning up spam accounts, as well as adding new filters and features in an update this week.

Instagram was acquired by Facebook back in April of 2012 for $1 billion. The acquisition came at a time when Instagram only had around 27 million users on iOS. However, the company saw over a million downloads n the first day of launching on Android, and Facebook put the pedal to the metal and closed the deal.

Instagram has since grown to have more active users than Twitter.

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How to unfollow, mute or ignore people on Facebook, Twitter, Snapchat and more


Gigaom

We’ve all been there. Whether it’s a picture of your friend’s new baby or your Aunt’s incessant updates about the weather in smalltown America, there are certain people in your social-media feeds that you’d like to just tune out for a bit (even just temporarily).

Social networks seem to be listening and have been rolling out features to help users regain a little bit of control of their social feeds without ruffling the feathers of any friends. The problem is each network has its own definition of tuning out someone, not to mention its own terminology.

To help you out, I combed some of the most popular social networks and muted/blocked/ignored/unfollowed everyone and everything I could. For a quick look, see our chart below. But we also have step-by-step pictures and an easy-to-follow guide for each network to make it easy to mute away.

How-to Guides:
Facebook
Google Plus
Twitter

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Antisocial Social Networking


The link below is to an article that takes a look at ‘antisocial’ social networking and social networks.

For more visit:
http://www.theguardian.com/media/2014/jun/01/antisocial-networks-social-media-private-thoughts-apps-distance-online-friends-technology

Facebook Admits Users Are Confused About Privacy, Will Show More On-Screen Explanations


TechCrunch

Facebook today offered reporters a deep dive on how it handles privacy and previewed some upcoming changes. The company revealed it does 80 trillion privacy checks per day on the backend to make sure data isn’t wrongly exposed. It runs 4000 surveys about privacy per day which pushed it to now begin displaying on-screen descriptions of how privacy controls work, including for status update audience selectors and resharing.

Facebook used to have every team work on its own privacy functionality, and then would have dedicated teams for privacy sprints around specific privacy changes. But as the company grew, two specific privacy teams evolved. One is the Privacy Product Engineering team that builds the settings that let users control who sees their content. The other is the Privacy Infrastructure Engineering team, which “helps engineers move the fast and build things” while still being confident there will be no privacy breaches, says Privacy…

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A Facebook Life


TechCrunch

On Facebook, life begins at conception. “We’re expecting!”, your parents post. You don’t have fingers but you’re already accruing likes. A shared sonogram means hundreds have seen you before you’ve even opened your eyes. You have a Facebook presence despite lacking a physical one.

Think about that for a second. Like it or not, in 10 years Facebook has changed everything. Each phase of this life is playing out right now across a billion people.

You exist in limbo until you turn 13. Your parents can post whatever they want about you, but you’re not supposed to sign up. But perhaps your curiosity wins out, so you fake your age and create a profile. Quite possibly the first in a long series of adolescent rebellions and lies about your age.

From then on, every action you take and thought you think will be accompanied by a little background decision to…

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