Tax avoidance in multinational companies

Multinationals Under Tax Fire in Australia & Russia

Multinational companies such as Google, Facebook, Microsoft, Apple and the like are under tax fire in both Australia and Russia, albeit for very different reasons.

Australia Slam MNCs with Hefty Tax Bill for Tax Avoidance

Last week, the Australian Tax Office (ATO) slammed multinational companies operating in the country with a $2.2 billion bill for failing to pay their share in taxes.

Speaking about these tax avoidance cases, ATO deputy commissioner Mark Konza said, “My message to overseas is the Australian community is sick of companies that don’t pay the right amount of tax in Australia.”

“We’ve got the law and determination to do something about corporate tax avoidance,” he said, adding that “one thing Australians hate is when they see an overseas billing address, they smell a rat.”

Additionally, Revenue and Financial Services Minister Kelly O’Dwyer reiterated this desire by the Australian government to curtail tax avoidance, saying, “This is a very serious message being sent to multinational companies that they must pay the tax that is owed to the Australian people.”

Australian tax authorities are currently looking into 59 other multinational companies with a team made up of close to one thousand lawyers, accountants and economists dedicated to unraveling tax irregularities.

London-based mining giant Rio Tinto, one of the companies affected by this decision, pledged to appeal the tax bill, “but will pay 50 per cent of the total amount to the ATO this month.”

Furthermore, Rio Tinto’s management suggested that Australia’s economy would be hindered moving forward unless the government lowered its corporate tax rates.

The company’s CFO Chris Lynch said, “We support the Australian government's policy to reduce the corporate tax rate,” but “if Australia remains with a 30 per cent corporate tax rate, this will come at a cost to investment and jobs, as other nations leave Australia behind.”

Other companies struck by this hefty tax bill include BHP Billiton, Crown, Shell, Chevron, Glencore, Google, Apple, Microsoft and Singtel.

Tax Avoidance in Oil & Gas Industry

Australia to Fight Currency Swaps in Oil & Gas Industry

The Australian government has also suggested it might act against currency swap deals, which are common in the country’s oil and gas sector and have diminished the country’s tax revenues from this particular industry.

As reported by Ben Butler for The Australian, this effort by the ATO would take issue with a series of complicated models in which required funds are brought into the country “through far simpler arrangements,” which “at its most basic level…involve circumstances where Australian subsidiaries have borrowed from related parties in a currency which does not make commercial sense.”

Both then agree to a “cross currency interest rate swap, purportedly to manage the exchange rate volatility of movements in the value of, for example, the US dollar,” subsequently changing “the lower rate of the USD loan into a relatively expensive synthetic AUD loan.”

According to ATO statistics and as reported by Butler, “11 key players in the oil and gas industry paid $3.9 billion in interest to their overseas associates last financial year on $106.6bn in debt.”

Google Tax Hits International IT Companies in Russia

Google Tax Hits International IT Companies in Russia

Tax circumstances in Russia vary a bit from those in Australia but have still hit multinational tech companies operating in the country.

In Russia, as reported by RT, the so-called Google Tax kicked in on January 1st and companies are lining up to “[register] with Russia’s Federal Tax Service as a foreign company selling electronic content in Russia.”

As of April 25th, companies like Facebook, Google, Apple, Microsoft, LinkedIn, Netflix, Bloomberg, and the Financial Times, among others, will have to pay the country’s 18% value-added tax (VAT).

Some of them, like Google, have opted to increase the costs of their products by 18% to make up for the lost revenue resulting from the VAT, essentially transferring this burden onto their customers.

This specialized tax only affects companies involved in providing Internet services such as domain names, trading platforms, online booking services, search engines, video games, music and e-books, among a host of others.

Government statistics suggest that this VAT will add about $174 million to the state’s coffers on an annual basis.

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