Google has reached a settlement worth almost half-a-billion dollars with the Tax Office after a marathon decade-long dispute over its tax practices in Australia.
The settlement, which involves no admission of liability, will see it fork out USD$481.5 million to the tax office after an audit investigated its tax practices between 2008 and 2018.
The ATO has now netted USD$1.25 billion after also signing tax settlements with Microsoft, Apple and Facebook over the past two years under the Multinational Anti-Avoidance Law. Google’s tax deal follows a USD$1.5 billion settlement with French tax authorities in September.
A Google spokeswoman said the settlement resolved a “longstanding dispute”. “The settlement will also provide certainty in relation to future tax treatment,” she said. The settlement was represented in the last consolidated financial results.
ATO deputy commissioner Mark Konza said in a statement the settlement was a great outcome for the Australian tax system.
“It adds to the significant success of the ATO in positively changing the behaviour of digital taxpayers and significantly increasing the tax they pay in Australia,” he said.
The move follows increasing scrutiny on the tax practices of global multinationals. Canada, France and Indonesia have all moved to improve digital services taxes on the revenue of online giants with little physical presence outside Silicon Valley.
Google paid the French authorities about €1 billion ($1.63 billion) in September, about half of which was in fines following a four-year investigation into its taxes. This came after a settlement of €306 million ($497 million) with Italy over allegations of unpaid tax from 2009 to 2013.
Google has lobbied against unilateral decisions by countries imposing a three per cent rate, which would see them pay multiple rates of tax across myriad jurisdictions.
It has backed efforts by Australia to impose one global solution through the G20 and OECD, but negotiations have been thwarted by the Trump administration, which has become increasingly wary of measures that would largely hit US companies. The US has threatened to impose tariffs in retaliation.
Google pays more than 80 per cent of its corporate income tax in the United States.
Prime Minister Scott Morrison last week accused digital multinationals of being “significant offenders” on tax that had now got the message: “We are not going to put up with this”.
Facebook, Uber, Microsoft and Apple all paid a 30 per cent tax rate on more than USD$666 million in taxable income in the 2017-18 financial year. Between them, the firms earned USD$12.5 billion from Australian consumers last year. Google, which made USD$1 billion alone in 2017-18, paid only 19 per cent tax after claiming deductions.
Google Australia restructured some of its practices in 2016, entering into contracts for services directly with Australian providers rather than running them through their US parent company, where they pay most of their corporate tax.