Yesterday more than 1000 Australian workers (including contractors) lost their jobs when transport company 1st Fleet shut down owing their workers various entitlements including unpaid superannuation guarantee payments and in debt to the tax office for millions of dollars in unpaid tax. Paul Hogan and John Cornell this week settled their tax problems with the ATO after the government spent an estimated $20 million dollars pursuing the entertainment pair for eight years. In July, the government will launch a blitzkrieg of new laws on 60 occupations associated with the building industry to stop tax evasion and ensure tradies pay every cent of tax they owe.

And yesterday we learned Google Australia has paid no tax on an estimated $940 million in web search advertising revenue generated locally, instead routing its Australian online ad sales through an Irish subsidiary, Google Ireland. Without a big tax expense, I’m sure Google will be able to keep its 400 Aussie employees’ entitlements up to date.

So is the Google tax arrangement legal? Crikey understands the company, which tells employees “don’t be evil” in its code of conduct, was granted approval from the US Internal Revenue Service in 2006 for its international tax arrangements so everything is above board.

The company utilises three tax planning arrangements to lower its Australian and international tax rates by $3 billion dollars annually known as the “Double Irish”, “Dutch Sandwich” and “transfer pricing” (see how it works here).

In a nutshell, the tax arrangements allow paper transactions among corporate subsidiaries that allocate income to tax havens while attributing expenses to higher-tax countries such as Australia.

Most Australians would view these arrangements as outrageous as they have their tax deducted from pay-packets each week while small businesses are overburdened with tax compliance red tape.

So what is the Gillard government doing about this? It announced last November an intention to reform the transfer pricing laws. Bill Shorten said: “The government is taking action to ensure multinationals pay the correct amount of tax in Australia on their income and to provide certainty on our transfer pricing laws.”

In March it released an exposure draft of the proposed amendments. The explanatory material that accompanied the draft says: “These amendments have been introduced to ensure the parliament’s intention is effective, that the Australian revenue is not compromised, and that international consistency is maintained with our tax treaty partners.”

Peter Fray

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