Google has been accused of paying a ‘laughably’ small amount of tax in Australia while at the same time ‘crying poor’ over plans that would force it pay its fair share for news content.
Daily Mail Australia can today reveal how the American tech giant minimises the tax it pays locally and funnels billions in earnings back to its parent company via a corporate tax haven in South East Asia.
Google Australia raked in $4.8 billion from its local operations in the last calendar year and owed the Federal government just $59 million in corporate taxes.
The local branch of the company, headquartered in lavish office space overlooking the Sydney skyline, claims it is simply an ‘agent’ or a middleman who sells ad space to local customers from a subsidiary in Singapore.
But the business employs more than 1,700 staff in Australia, largely in Sydney where staff have access to nap pods, free lunches, a rock climbing wall and a meeting room fashioned out of two of the city’s iconic Monorail carriages.
Despite the rivers of gold flowing back overseas, the company has made the extraordinary claim that a rule change that would force it to divert a sliver of its revenue to news companies represents an ‘enormous and unreasonable demand’.
Google’s Sydney HQ on Pirrama Road, Pyrmont, has always had a reputation for zaniness. Above, a visitor makes the most of an ergonomic ‘working pod’ where employees can set themselves up on their laptops
Welcome to Google: The wealthy tech company has always prided itself on its campuses – with pool tables just some of the entertainment opportunities on offer for staff and visitors
Not a bad view: Some Google HQ workers have a view of Sydney’s CBD while others can peek at the water and the far-off Harbour Bridge
Back in 2013, Google installed a carriage from Sydney’s old monorail in their Pyrmont offices
The Monorail carriages – once the city’s most pilloried form of public transport – are now used as meeting rooms
Google – one of the world’s most profitable businesses – has this week gone to the unprecedented step of publishing an open letter to its millions of Australians users suggesting that proposed code ‘would put our free services at risk’.
The contents of that extraordinary statement has been slammed as ‘misinformation’ by the Australian Competition and Consumer Commission.
And it comes amid mounting concerns over how little tax big Silicon Valley companies such as Google pay in Australia.
How does Google pay such little tax?
The search engine colossus took in a total of $4.8 billion from its local operations last year, according to financial documents. But it declared a net revenue of just $1.2 billion.
Meanwhile, Google Australia made a pre-tax profit of $134 million in 2019, resulting in a $59 million corporate tax bill. The company has paid substantially more tax in recent years due to a dispute with the Australian Tax Office.
But it still seems like a drop in the ocean given more than $3 billion a year from local operations are being booked in Singapore.
How the company’s structure works is explained in filings with the corporate regulator.
Google said its local business is simply an ‘agent’, or a middleman, for its Singapore-based company, Google Asia Pacific.
The company claims that staff in Australia simply book a commission on sales it facilitates to the Singapore company. The rest goes to the Singapore business.
Where else would you rather work? A worker props herself up on a hammock and gets down to business
Time to hit the nap pod: A Google employee appears to take a break in the tech company’s Australian headquarters
American diner style furniture in one of the building’s many cafes and food courts
‘(Google Australia) reports revenue from advertising … to facillitate the sale of advertising between Google Asia Pacific and the advertiser, for which the group earns a commission,’ the company’s latest financial documents said.
‘(Google Australia) does not control the advertising inventory before it is transferred to the advertiser’.
In other words, Australian businesses, buying Australian ads for Australian websites and customers, are performing their transactions in Singapore – with the local getting a commission, like a real estate agent does.
Google is far from alone among tech companies to come under fire for tax minimisation. During his maiden speech to Parliament last year, Labor Senator Tony Sheldon called for tech giants such as Amazon and Netflix to be called for account.
Mr Sheldon said on Friday: ‘Who really believes Google when they cry poor?
‘As one of the worlds most profitable companies, they pay a laughably small amount of tax.
‘The Australian public and small business are waking up to how predatory these digital giants can be.’
One big playground: ‘Dance Dance Revolution’ style games and pinball are on offer for Google employees
Not everything is so high tech at Google HQ, with a Daily Mail photographer previously being shown this den-style room
Google extends a warm welcome to everyone and anyone who wants to use this bathroom
The OECD (Organisation for Economic Cooperation and Development) has discussed taxing digital companies like Google more aggressively.
But that work has been delayed due to the coronavirus pandemic and Mr Sheldon said the Federal Government should get cracking on a digital services tax of its own.
A Google spokesman said the company had invested almost $1 billion in its Australian company during 2019.
‘Alphabet, Google Australia’s ultimate parent company, paid more than US$5.28 billion of corporate income taxes globally during the same period,’ the spokesman said.
‘We comply with the tax laws in every country where we operate, and our platforms both provide critical consumer services and enable Australian businesses across all industries to participate in the modern digital economy
What Google owes the press
The irony wasn’t lost on journalists at Fairfax Media when the publishing company signed over its lease on several floors of its Pyrmont headquarters to Google in 2018.
The search giant was eating up floor space that was once filled by journalists who produced newspapers like The Sydney Morning Herald. It was an apt metaphor for what the tech company was doing to the media’s advertising revenue.
American tech conglomerates Google and Facebook now take in about $6 billion in digital advertising revenue each year.
Publishing houses say they are owed a sliver of that money, as they produce the news content that attracts customers to these platforms in the first place. The Australian Competition and Consumer Commission’s proposed new rules would mandate just that.
In a statement, the regulator said: ‘The draft code will allow Australian news businesses to negotiate for fair payment for their journalists’ work that is included on Google services.
”This will address a significant bargaining power imbalance between Australian news media businesses and Google and Facebook.
‘A healthy news media sector is essential to a well-functioning democracy.’
A Google visitor poses with a table being used to store copious amounts of Lego
A Streetview bike on display at the company’s headquarters
However, Google search users across the country were this week confronted with an alarming yellow exclamation mark on the search engine’s homepage.
Accompanied alongside it was a vague warning from Google’s local managing director, Mel Silva.
Ms Silva warned Google’s products would be made ‘significantly worse’ by the new rules.
She appeared to hint it could see the end of free searches, arguing the changes ‘would put the free services you use in Australia at risk’.
Google managing director Mel Silva was the face of the search engine’s letter, published online
The statement prompted the ACCC to lash out at ‘misinformation’ in Google’s statement.
Google backpedalled, with a spokesman saying the search provider did not plan to charge users for its best known service.
‘We did not say that the proposed law would require us to charge Australians for Search and YouTube – we do not intend to charge users for our free service.’
Despite Google’s thundering, economist Allan Fels, the former chairman of the ACCC, said there was nothing new in a company spitting the dummy over a competition regulator’s actions.
‘It’s customary in virtually all ACCC matters for people to say it’s the end of business for them, that jobs and investment are at risk and they might have to close,’ said Mr Fels, a former chairman of the body. ‘It’s to be expected.’
Mr Fels said it was difficult to discern what serious point Google was trying to make beyond generalisations, and said the government was consulting with the company anyway.
Below, Daily Mail Australia presents some of Google’s claims, and their counter-arguments. Google itself was approached for comment for this story.
Google’s claims debunked
GOOGLE’S CLAIM: ‘We need to let you know about new Government regulation that will hurt how Australians use Google Search and YouTube’
Not true. The new law will make no difference at all to how Australians use Google Search and YouTube. You will be able to search both in exactly the same way you do at present. The only change will be that Google will have to pay for Australian news content which at the moment they use for free. As Google’s Australian revenue in 2019 was $4.8 billion it should not find this difficult.
GOOGLE’S CLAIM: ‘A proposed law, the News Media Bargaining Code, would force us to provide you with a dramatically worse Google Search and YouTube, could lead to your data being handed over to big news businesses, and would put the free services you use at risk in Australia.’
Not true. The Code will not force Google to provide a worse service, on the contrary it contains provisions to prevent it removing Australian news websites and replacing them with foreign ones. It will not lead to your data being handed over to news businesses, big or small. This is the ACCC’s response to Google’s claim: ‘Google will not be required to share any additional user data with Australian news businesses unless it chooses to do so’. Nor will the Code put free services at risk. The ACCC says: ‘Google will not be required to charge Australians for the use of its free services such as Google Search and YouTube, unless it chooses to do so.’
GOOGLE’S CLAIM: ‘The way Aussies search every day on Google is at risk from new regulation. You’ve always relied on Google Search and YouTube to show you what’s most relevant and helpful to you. We could no longer guarantee that under this law. The law would force us to give an unfair advantage to one group of businesses – news media businesses – over everyone else who has a website, YouTube channel or small business … We’ve always treated all website owners fairly when it comes to information we share about ranking.’
Blatantly untrue. Google’s search algorithms are a secret ‘black box’, and rankings are regularly changed without warning or explanation, sometimes with catastrophic effects for businesses.
To give just one example: June 2019 Google made an algorithm change which reduced the Daily Mail’s search visibility by 50pc worldwide – meaning dramatic reductions in the number of Daily Mail stories appearing in your search requests. There was no warning or explanation – nor did Google inform you, the user. Three months later our search visibility was suddenly restored, again without warning or explanation. Many other websites have had similar experiences.
The Code simply provides that Google will have to give warning and explanation of changes that could impact traffic to a news website – and tell it how it can minimise any damage. If Google thinks that is unfair, fine – they can provide the same information to every website. Now, that would be fair.
GOOGLE’S CLAIM: ‘Your Search data may be at risk. You trust us with your data and our job is to keep it safe. Under this law, Google has to tell news media businesses ‘how they can gain access’ to data about your use of our products.’
Not True. As the ACCC says, Google will not have to share any more user data than it does already. The ACCC’s explanatory notes make clear it is lists of types of data Google must provide to news media businesses, not the data of individual users. In any case, why should users trust Google more than any other business? Only last month the ACCC launched Federal Court action over the alleged misuse of users’ personal data by Google, and Google has previously been fined millions of dollars in Europe for misusing users’ data.
GOOGLE’S CLAIM: ‘Hurting the free services you use.’
Not true. Google’s services aren’t free – you pay for them with your data, which Google collects in order to sell advertising targeted at you. Google doesn’t pay news media businesses millions of dollars. It currently pays nothing at all for the news it uses – and only began offering to pay when it realised the ACCC was going to call its bluff by introducing legislation.
It has also bought control of digital advertising by taking over smaller businesses to create a virtual monopoly, where it acts as both buyer and seller in digital advertising markets it controls, and for which it makes the rules. It forces news media businesses and advertisers to use its services and charges both millions of dollars, some of it in hidden fees. The result is consumers pay more for the goods they buy. These anti-competitive practices are under investigation by the ACCC here in Australia and by regulators in other countries.
GOOGLE’S CLAIM: This law wouldn’t just impact the way Google and YouTube work with news media businesses – it would impact all of our Australian users, so we wanted to let you know.
Not true. The only impact this law will have on Australian users is that intended by the ACCC – that instead of Australian journalism dying through being starved of revenue by monopolistic internet giants, it will have a sustainable future, for the benefit of all Australians. Oh, and Google – global annual revenue in 2019 $161 billion – might make just a little less profit
GOOGLE’S CLAIM: You’ll hear more from us in the coming days – stay tuned.
True, regrettably. Google has won immunity from libel laws all over the world by claiming it has no opinions. Well, it does when its bottom line is under threat. It runs one of the world’s largest lobbying operations and have no doubt, Australian legislators will be bombarded with misinformation as Google tries to overturn the ACCC’s proposals. Watch out!