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Australia's planned 'Google tax' may violate int'l tax treaties: officials

Xinhua, April 2, 2015 Adjust font size:

The plans of Australia's treasurer to get multinationals, such as Google and Apple, to pay more tax may violate international tax treaties, the country's parliamentary budget office has found.

The finding, reported by Fairfax Media on Thursday, could derail federal treasurer Joe Hockey's wish to stop multinationals such as tech giants Google, Apple and Microsoft from shifting their Australian-made profits to tax havens overseas.

Google paid a minuscule 224,000 U.S. dollars in Australian tax despite estimated earnings exceeding 1.5 billion U.S. dollars. It also claimed a 3.4-million-U.S. dollar grant from the taxation office for "research and development offsets."

Hockey has public support to introduce a diverted profits tax, like that being considered by United Kingdom Treasurer George Osbourne, but the independent Parliamentary Budget Office (PBO) has warned Hockey that it could result in "revenge taxes" being placed on Australian businesses operating overseas.

In December, the PBO was asked to model a diverted profits tax plan. In the findings reported by Fairfax on Thursday, the PBO estimated a policy that did not violate existing tax treaties would only raise 17 million U.S. dollars a year.

"It is possible that the legal validity of imposing such a tax could be subject to challenge, under either Australian or international law, with potential financial implications for Australia," it said in the finding.

"In addition, other countries may respond by imposing taxes that breach their tax treaty agreements with Australia.

"An explicit breach of an international agreement would be likely to have an adverse impact on Australia's strong reputation as a safe destination for international investment, with negative implications for economic growth over the medium to long term."

Tax Commissioner Chris Jordan told Fairfax Media that tech multinationals were the "most aggressive" tax minimizers and pledged that the Tax Office would improve its targeting of multinationals to increase revenue by 750 million U.S. dollars by 2017. Endi