How Facebook shifts Aussie cash offshore
WHEN an Australian business seeking more local customers clicks "boost post" on Facebook, the money it pays - as much as $1 billion a year - goes to low-taxing Ireland or the US.
Facebook Australia only earns revenue from Australian businesses if there are direct dealings with its Sydney and Melbourne sales teams.
Those transactions account for less than 40 per cent of its actual turnover here.
"It's nonsense, what they are doing," said marketing professor Mark Ritson, who estimated as much as $1 billion was now being shifted offshore annually.
But it's a practice whose days may be numbered as Senate crossbenchers such as One Nation's Pauline Hanson demand the Turnbull Government find ways to get tech titans to pay their fair share before it will entertain supporting a the Prime Minister's signature policy - a cut in the corporate tax rate.
Options for making Facebook, Google and others pay their way could even include introducing a digital services tax, or DST, of three per cent of turnover, as Spain recently vowed. This has the support of two-member Senate crossbench party Centre Alliance, which was the Nick Xenophon Team.
Facebook Australia's 2016 accounts say the "company was converted into a local reseller of advertising inventory and concludes all sales with customers managed by the sales team in Australia".
The conversion came after Parliament passed a multinational anti-avoidance law in December 2015.
Facebook Australia's revenue jumped 10-fold to $327 million in 2016. But nearly $500 million of sales generated from Australia still went to Ireland and the US.
Professor Ritson, of the Melbourne Business School, said Facebook's rapid rate of growth meant the sales heading abroad this calendar year could be as much as $1 billion - enough to fund the entire operation of the Royal Flying Doctor Service three times over.
Facebook's 2017 accounts show its Australian tax bill for 2017 was just $11.6 million.
There had been speculation that ahead of a vote on the corporate cuts as soon as this week Treasurer Scott Morrison would release a discussion paper on how to clamp down of multinational tax dodging. But tonight he told News Corp Australia the paper would be made public "in a few weeks".
"While we have had some significant wins in ensuring multinationals pay their fair share of tax, bringing more than $7 billion a year of what they sell into Australia into our tax net, there is still more to be done," Mr Morrison said. "It's not straightforward and we have to be careful that we don't open up Australian companies to higher taxes on what they sell overseas, like our minerals exports, making them less competitive and costing us jobs here in Australia."
A Facebook spokesman said: "We comply with applicable tax laws."
KPMG tax partner Grant Wardell-Johnson said companies should sign the voluntary tax transparency code set up by the Board of Taxation. The Board, which provides advice to the Government, established the code to increase disclosure of tax information by companies, particularly large multinationals. More than 130 companies have signed the code. Facebook is not one of them; Google is.
"I think it's important to make these things more transparent and improve the debate in relation to corporate taxation," said Mr Wardell-Johnson.
"It will help satisfy the concerns for a number of people in civil society about whether companies are paying their fair share."