Hot on the heels of news published earlier this month that multi-nationals are still paying little to no tax here in Australia, one of the world's most well-known corporate juggernauts has announced it has reached a settlement with the ATO after a decade-long dispute.
The settlement, which involves no admission of liability, will see tech giant Google pay $481.5 million to the tax office after an audit of its tax practices between 2008 and 2018.
In a statement, Google said 'the settlement provides more certainty in relation to future tax treatments.'
Meanwhile, the ATO is crowing victory, with a spokesperson stating, "[Google] joins the likes of Microsoft, Apple and Facebook who have all publicly stated that they have settled their tax affairs with the ATO and we welcome their transparency".
As a result of these settlements, the ATO has netted $1.25 billion.
In recent years, the Australian Government has devoted more taxpayer dollars to fund the ATO, enabling the office to tighten laws and crack down on both multi-nationals and wealthy individuals who have been able to find loopholes in the tax regulations.
The government has also given the ATO increasing power to cross-match data. And while this may assist in reducing tax evasion offences in Australia, there continue to be systemic problems with the tax regime itself.
Netflix pays minimal tax
While the corporate tax rate in Australia is 30 cents per dollar, it has been revealed that Netflix pays an effective tax rate of around 0.5% here, and it is not breaking the law. On an estimated $600 million – $1 billion in revenue, the streaming service paid just over $340,000 in tax.
The arrangement is perfectly legal because Australian users are charged by the company's Dutch subsidiary. The only tax Netflix is reported to have paid in Australia is on the $12.1 million service fee it pays its local arm here.
This is the reality of corporate financial structuring. Of course, these companies have an ability to use legitimate deductions and concessions too.
And because it is often difficult for ATO specialist investigations unit to build a comprehensive legal case, most disputes are settled outside of the courtroom.
Problems with the Australian tax system
The situation highlights a serious problem with the Australian tax regime, as while big business pays very little tax, many small businesses are required to provide a large chunk of their revenue to the tax office.
And while the ATO has put many of these larger organisations under scrutiny, it has simultaneously cracked down on small Australian-owned businesses too.
The ATO has introduced several new measures over the past two years to ensure more timely taxation payments. And as part of ongoing tax reform, the Federal Government is currently seeking to introduce laws which make it illegal to pay cash in many transactions of $10,000 or more.
The Restrictions on the Use of Cash Bill creates four criminal offences, which relate to cash payments of 10,000 or more for goods or services transacted between two entities.
Two of these offences apply those who either intentionally or recklessly conduct a cash transaction of $10,000 or more. One relates to a single payment and the other to a series of payments. The maximum penalties for these crimes is 2 years prison and/or a fine of $25,200.
The other two offences are strict liability crimes, meaning the prosecution is not required to establish a fault element such as negligence, recklessness or intention. One applies to single payments and the other to a series of payments. The maximum penalty is a fine of $12,600.
The Currency (Restrictions on the Use of Cash—Excepted Transactions) Instrument 2019 sets out a number of transactions that the $10,000 cash limit doesn't apply to. These include private transactions, legally required payments made by public officials and digital currency payments.
The new cash restriction laws are expected to take effect on 1 January 2020.
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