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.

See Google’s Absolutely Stunning New Headquarters Design


TIME

Google has unveiled its ambitious new plans for a sprawling, modern Googleplex. The new facility, being developed by architect Bjarke Ingels, features a series of glass, canopies the size of city blocks, new biking and walking paths and an emphasis on green space. Renowned designer Thomas Heatherwick is also involved in the project. Google hopes to complete the first stage of development by 2020, but the company will first have to win approval from Mountain View’s city council amid growing concern over Google’s control over the development of the community.

[time-brightcove videoid= 4084569777001]

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Check your Google security settings, receive 2GB of free Drive storage


Gigaom

Here’s an easy way to get 2GB of Google Drive storage: In the next week, head to Google’s security checkup page and follow the instructions. On February 28, Google will credit your account with the additional cloud storage space. The security checkup takes less than 5 minutes to complete, and it’s simple — it asks you what your backup email address is, whether any recent account activity is odd, and to review the various apps you’ve given Google account permissions to (there are probably a lot.) Sure, 2GB of additional Google Drive space isn’t a ton (you get 15GB for free), but you probably should review your security settings anyway.

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A Personal Reflection On Google+


TechCrunch

[tc_dropcap]I joined Google the day after my Stanford graduation in June of 2011, and two days later got to take a peek at the product I would be working on for the next three months. There had been rumors in the press for a while that Google was building some sort of secret social network, but these stories were mostly unsubstantiated rumors.[/tc_dropcap]

Now, for the first time, I got to look upon the future of the world’s most recognizable Internet company and, perhaps, the future of social as well.

The product, internally known as Emerald Sea, was just two weeks from launch, and a digital counter near my desk was ticking down the days to June 28, 2011. I had just gotten my Google-issued laptop, so I opened up my web browser, and navigated to the internal version of the product, and …. stared. Just stared. It’s hard to…

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Exclusive: TIME Talks to Google CEO Larry Page About Its New Venture to Extend Human Life


Business & Money

Can Google, the technology giant best known for search and free email, tackle aging?

The Mountain View, Calif.-based company is planning to launch Calico, a new firm that will attempt to solve some of health care‘s most vexing problems. One of the independent venture’s major initiatives will be significantly expanding human lifespan. Arthur Levinson, the former chief of biotech pioneer Genentech, is an investor in Calico and will serve as its CEO.

The Sept. 30 issue of TIME profiles Google co-founder and CEO Larry Page as well as his decision to launch Calico.

Based in the Bay Area, not far from Google’s headquarters, Calico will be making longer-term bets than most health care firms. “In some industries, it takes ten or 20 years to go from an idea to something being real. Healthcare is certainly one of those ares,” said Page. “Maybe we should shoot for the things…

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Microsoft on Google


The link below is to an interesting article concerning some comments made by Microsoft CEO Steve Ballmer on Google and its ‘monopoly.’

For more visit:
http://www.theverge.com/2013/9/20/4751516/ballmer-calls-google-a-monopoly