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Australia's biggest companies to be forced to disclose tax they pay Apple may have misled Australians over how it sets prices, says MP
(about 9 hours later)
A bill to force Australia's 2000 biggest companies to publicly disclose how much tax they pay will be introduced into federal parliament. Apple may have "deliberately or accidentally" misled Australians about how it sets prices here and should "correct the record or provide further detail", a Labor backbencher has demanded.
The proposed law comes as the government reacted furiously to revelations IT giant Apple had a complicated tax structure allowing huge profits from subsidiaries outside the United States to be effectively "stateless" for taxation purposes. Backbencher Ed Husic, who has taken a leading role in an Australian parliamentary committee into IT pricing, said shock revelations from a US Senate committee raised concerns "the Australian inquiry has been misled, either deliberately or accidentally".
It also follows a new report, Secrecy Jurisdictions, the ASX and Public Transparency, which showed that as of April 2011, 61 of Australia's top 100 companies held subsidiaries in ''secrecy jurisdictions'' that had been targeted by tax authorities - at least some of them with little evidence of actual commercial activity. "I'd call on Apple Australia to either correct the record or provide further detail as to the way it actually prices its products for Australian consumers," Husic told the House of Representatives.
Assistant treasurer David Bradbury, reacting to revelations about Apple's taxation arrangements in a recent US Senate committee, told Guardian Australia that Australians had reason to be "doubly infuriated" with Apple because the company set up complicated structures to avoid taxation and also charged Australians higher prices for their popular products. Husic said people may have "raised an eyebrow" at reports that Apple generated $6bn in revenue in Australia but "paid only $40m in tax – apparently because it racked up $5.5bn in costs", but "their eyes would've popped out" at the US revelations Apple had set up an offshore subsidiary that earned $30bn income but had apparently paid no tax to any government for five years.
Bradbury said he had been "astonished to learn that a company like Apple could record income on this scale and have no home for tax purposes, I had heard of profit shifting to other jurisdictions but this is shifting profits into the ether." And the two committee investigations were related, because Apple's complicated international structure has an impact on the prices paid for Apple products for Australians.
Many companies covered by the proposed new law - those with total income over $100 million - do report their tax, but according to the government many others do not, or report it in a way that does not clearly disclose what they actually pay. He said Apple had told his committee that prices were set by the US parent and "Apple overseas", but the US committee heard Apple's Australian prices were "determined by Apple Singapore".
Mark Zimsak, of the Uniting Church's Justice and International Mission unit, which released the "Secrecy jurisdictions" report, said the new law would "at least help us know what tax companies pay in Australia." "The corporate structure detailed in the US Senate report was never offered by Apple Australia and when pressed on its transfer pricing or price setting. I put it to the house that Apple deliberately avoided setting out the detail that became evident in the US report," Husic told the House of Representatives.
But he said it "did not differentiate which companies were profit shifting and which were claiming legitimate deductions." The assistant treasurer, David Bradbury, has also reacted angrily to revelations about Apple's taxation arrangements to the US Senate committee, telling Guardian Australia that Australians had reason to be "doubly infuriated" with Apple because the company set up complicated structures to avoid taxation and also charged Australians higher prices for its popular products.
In a submission to treasury about the proposed law, the Corporate Tax Association said it would not "enable the community to draw informed conclusions about whether or not any particular company is paying its 'fair share' of tax, whatever that means" and would require data to be provided in a way that could be misinterpreted. Bradbury said he had been "astonished to learn that a company like Apple could record income on this scale and have no home for tax purposes". He added: "I had heard of profit shifting to other jurisdictions but this is shifting profits into the ether."
Apple has a ten-year old "advance pricing agreement" with the Australian Taxation Office covering the "the transfer pricing method" it has used. In its 12 April letter to a parliamentary committee, Apple confirmed this agreement was "in the process of renewal". Apple has a 10-year old "advance pricing agreement" with the Australian Taxation Office covering the "the transfer pricing method" it has used. In its 12 April letter to the Australian parliamentary committee, Apple confirmed this agreement was "in the process of renewal".
New tax commissioner Chris Jordan told Guardian Australia he believed there was also "a very good case for multi-country tax audits to look into this kind of global profit shifting." Asked for a response to Husic's remarks, a spokeswoman for Apple referred Guardian Australia to the Apple Australia chief executive, Tony King's recent evidence to the parliamentary committee.
Jordan said a multi-country audit could be done through the G20, or just with cooperation between the revenue authorities of different countries. King told the committee: "We pay our taxes when they are due – not only income tax expense but GST, payroll, FBT and any other tax that might be incurred in doing business in Australia."
A spokeswoman for Apple referred Guardian Australia to Apple Australia chief executive Tony King's recent evidence to a parliamentary committee that is investigating concerns that IT companies including Apple, Microsoft and Adobe charge more for many their products in the Australian market than in the US.
King told the committee "we pay our taxes when they are due—not only income tax expense but GST, payroll, FBT and any other tax that might be incurred in doing business in Australia."
He explained that Apple's Australian subsidiary Apple Pty Ltd reported revenue and costs and paid tax on its net profit.He explained that Apple's Australian subsidiary Apple Pty Ltd reported revenue and costs and paid tax on its net profit.
But the US Senate committee reported on the procedure used by Apple for products sold in Asia, including to Australia.But the US Senate committee reported on the procedure used by Apple for products sold in Asia, including to Australia.
An Irish-affiliate company, Apple Sales International, "took title to the manufactured products while they were being shipped to Apple's Asian distribution centers. When they arrived, ASI sold the products to Apple Singapore at a substantial profit. Apple Singapore then resold the products, in turn, to Apple retail entities or end customers...Transferring title in this manner allowed Apple to retain most of its profits in Ireland, where it has negotiated a favorable tax rate and maintains entities claiming to have no tax residence in any country, and limit the income it reported in the non-tax haven countries," the report from US permanent subcommittee on investigations said. According to the report from the US permanent subcommittee on investigations, an Irish-affiliate company, Apple Sales International, "took title to the manufactured products while they were being shipped to Apple's Asian distribution centres. When they arrived, ASI sold the products to Apple Singapore at a substantial profit. Apple Singapore then resold the products, in turn, to Apple retail entities or end customers … Transferring title in this manner allowed Apple to retain most of its profits in Ireland, where it has negotiated a favourable tax rate and maintains entities claiming to have no tax residence in any country, and limit the income it reported in the non-tax haven countries."
King also told Australia's house of representatives infrastructure and communications committee on 22 March there were reasons Apple's prices were sometimes higher here.King also told Australia's house of representatives infrastructure and communications committee on 22 March there were reasons Apple's prices were sometimes higher here.
"When comparing prices it is important to remember that the US retail prices do not include sales tax. Here in Australia, of course, a price includes a 10% GST. That fact alone is responsible for a great deal of confusion and has resulted in some inaccurate conclusions regarding our pricing." He said: "When comparing prices it is important to remember that the US retail prices do not include sales tax. Here in Australia, of course, a price includes a 10% GST. That fact alone is responsible for a great deal of confusion and has resulted in some inaccurate conclusions regarding our pricing."
He said Apple also had to "consider differences between countries in product costs, freight charges, local sales taxes, levies, import duties, channel economics, competition and local laws regarding advertised prices." and pointed out Apple was also unable to adjust its prices every time currency exchange rates fluctuated. He said Apple also had to "consider differences between countries in product costs, freight charges, local sales taxes, levies, import duties, channel economics, competition and local laws regarding advertised prices" and pointed out Apple was also unable to adjust its prices every time currency exchange rates fluctuated.
The angry response to revelations about Apple's tax structure comes as a bill to force Australia's 2,000 biggest companies to publicly disclose how much tax they pay is introduced into federal parliament on Wednesday.
It also follows a new report, Secrecy Jurisdictions, the ASX and Public Transparency, which showed that as of April 2011, 61 of Australia's top 100 companies held subsidiaries in ''secrecy jurisdictions'' that had been targeted by tax authorities – at least some of them with little evidence of actual commercial activity.
Many companies covered by the proposed new law – those with total income over $100m – do report their tax, but, according to the government, many others do not, or report it in a way that does not clearly disclose what they actually pay.
Mark Zimsak, of the Uniting Church's Justice and International Mission unit, which released the "Secrecy Jurisdictions" report, said the new law would "at least help us know what tax companies pay in Australia".
But he said it "did not differentiate which companies were profit shifting and which were claiming legitimate deductions".
In a submission to the Treasury about the proposed law, the Corporate Tax Association said it would not "enable the community to draw informed conclusions about whether or not any particular company is paying its 'fair share' of tax, whatever that means" and would require data to be provided in a way that could be misinterpreted.
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