Why Does Apple Pay So Little Tax In Australia?

Last year Apple paid $40 million in Australian taxes. A fair figure some would argue. But when you consider that Apple's revenue during that same period was $6 billion, that raises some eyebrows. Ed Husic, Federal MP for Chifley, wants to know why Apple is earning so much and paying so little.

After hearing that Apple claimed $5.5 billion in expenses, Ed Husic said the following...

How? They do not manufacture here. They have no factories here. I do not know what their R&D effort is here—I do not know if they are claiming that this is driving their costs up. They have got a growing number of retail outlets, which I am happy about—they are creating jobs locally; that is great—but surely those outlets do not cost $5.5 billion to maintain.

They have a head office here, but you would not know it because they maintain a cloak of invisibility and their key management team dodge any scrutiny and refuse to even engage on public policy issues. Given the lack of work they do on that front, you would hardly say that it cost $5.5 billion to maintain a head office here and dodge that limelight.

These figures have led Husic to wonder precisely how and why tech giants are paying so little tax in this country.

You can read Ed Husic's full speech here.

Apple Is About To Get Slapped Over Its Australian Tax Bill [Gizmodo]


Comments

    I suspect it's because they're Apple. They seem to live by their own rules not just here but everywhere around the world.

      Them and a LOT of other companies. (Apple I think is also being investigated in the UK over tax.)

      The problem is that governments are not enforcing tax laws enough on businesses. The penalties need to be made nastier and need to be handed out more often - small fines are not enough to make them jump, they either need to be significantly larger or something else needs to be the penalty.

      As I put it - sure, they may not have factories, but the trucks delivering their goods use our roads, their stores are using our electrical grid and sewer system, their employees are making use of services paid for and maintained by our government. If you are going to use our government-provided infrastructure and services, it is not unreasonable in any way to require some form of contribution to the costs of maintenance.

        The trouble is, these big companies like to route their transactions through other nations with lower tax rates. To fix this would require an international effort, that said countries want no part in, because this process gives them more tax money.

        I just bought a Nexus 4 from the Google Play store, and the receipt said that about $38 GST was included in the cost. But nowhere was there an ABN, and my bank hit me with an international transfer fee, which led me to look more closely. Turns out the bill went through Singapore. I bet they've just pocketed that bit that they call "GST".

      The difference is that most other companies don't hold the same spell over your average Joe like the Cupertino Cult does.

      If you told someone, hey, Caterpillar is being looked into for tax evasion, they'd say "Good." If you told them it was Apple..."Oh, noes, but Apple is such a wonderful company, ATO are bastards!!!"

        Well, Google and Amazon are pretty popular both but in the UK they've been scrutinized quite a bit for evasion. The problem isn't so much the evasion - these companies WILL try and maximize profit, wherever possible. The problem is the lack of oversight or legislation (international or otherwise) that will stop this happening.

    They are opening apple stores everywhere shop fit outs have to be expensive to maintain that Apple is a premium product. Unlike places like JB who have a cheaper fit out and rely on their low prices to make money.

    Let's be serious here, if they claimed 5.5 billion in expenses they have to back it up with proof, just like if I tell the tax department I spent $5000 on steel cap workboots I need to prove it.

    JB having cheap fit outs is good because their prices are fantastic.

    Last edited 06/02/13 3:28 pm

      Really? Because I look at the prices I pay on Steam and other online retailers, then compare them to JB and I'd pay about 40% more buying from JB. Are you getting a kickback from them, or are the JBs in my neighbourhood just shitty? I reckon the latter prolly...

        The comparison dknight1000 made is between physical shops, not online ones. All the usual obvious arguments apply to the online VS physical shops argument, staff wages, overheads, cost of distributing physical product around a large country like Aust, etc, etc.

        Er, JB sells more than games, and I'd be willing to be in this context, DK1K is comparing Apples to Apples, if you will: the cost of selling an Apple product in JB versus the cost of selling it in an Apple store.

        I find JB prices (for games, at least) are usually around $10, maybe $20 more expensive than online, and personally, I'd pay that extra price to have a physical copy on disc that I won't need to bother downloading.

        I wasn't thinking of Video Games in this comparison as Apple stores don't sell Video Games. I pretty much buy all my PC games on Steam during Sales so you don't have to tell me digital distribution is cheaper.

        Where would you buy your new iPad from? JB? EB? Harvey? or Apple? I suppose you could but it from HonestDude209* on E-Bay.

        But if the product is a knock off or arrives broken you may have issues getting your money back and if you have to pay for shipping it back you'll be definitely out of pocket. Paypal is good but if the guy claims the post lost or broke it and you didn't insure it your out of pocket. E-Bay is very safe but there are some quite negative stories out there.

        gus & lith pretty much nailed it. Although JB do have a larger Range of Tablets, Smart Phones and Various Computers than an Apple store because they stock more than a single brand.

        *made up name

        Edit: And no I don't work for JB, but every time a Friend wants help buying a TV, we look around and find the same TV much cheaper at JB than Harvey Norman or Myers.

        Last edited 06/02/13 4:54 pm

      Ok so a square room with flat benches in it costs more than fitting out a JB hifi store? really? just the TV section alone would be worth more than the products in an apple store and im sure the shelving in JB would be on par if not more than those desks at apple.

      Now Apple paid 15% tax on 6 Billion yet last year my tax bill was 1/3 of my gross salary, more than double Apples tax bill percentage. Work that out?! its bullshit, they should be paying a heck of a lot more than us!

        Tax on business is a flat 25% it doesn't go up or down like ours does. the presumption is that the profit (the bit you pay tax on) is tiny compared to salaries, expenses, etc.

        Everything Apple is overpriced, and made by 'slaves', they aren't the be nice company pictured in their turtle neck wearing advertisements. The only way they will "pay" for the things they pull to squeeze every penny would be to not buy their product.

        but you try telling everyone on the planet that "Apple suck" or "Apple are taking your monies" and see where that puts you in your social circles :-)

    You'll find it's the same as other foreign-owned companies: there are always loans, licensing and management fees (massively inflated) etc that are paid from the Australian company to the foreign-owned parent. It is dodgy and the ATO tries to crack down on it when it can. The Commonwealth has broad powers relating to tax minimisation, but you can guarantee that Apple would defend tooth and nail, just like Wesptac in the NZ case where it got stung for around $1b.

    If I were Apple's stockholders I'd hope they'd be paying as little tax as they can within the law.

      This, exactly. The law provides many legitimate ways for a company to minimise tax. I have little doubt that what Apple is doing is entirely legal, and that if its Board wasn't getting it to do such things its shareholders would kick 'em out and replace them with another Board. Apple is doing what it is compelled to do, in a world driven by greed.

      I'm not an apple shareholder, and I can tell the difference between myself and an apple shareholder, so fuck 'em. I hope the ATO rips the shit out of them.

        If they're within the law? The ATO can't do anything to them. If they break the law, they'll get fined/imprisoned/whatever (I'm optimistic, I know). Which the shareholders wouldn't want (if they get caught).

    Ed Husic has obviously either never studied accounting, or didn't pay attention when he did.

    Apple, like all multinationals, either engages in the practice of transfer pricing, or has a commissionaire structure.

    Transfer pricing occurs when an internal supplier sets the prices for the goods/services it provides so as to minimise the tax the overall business has to pay. For example, Apple may have a warehousing company in China that charges the Australian distributor 90% of RRP for each item of inventory shipped from China to Australia. Most of the profit from the sale is captured in China, and so Apple pays little tax in Australia (and little tax in China too, due to low tax rates.)

    In a commissionaire structure, the local distributor is simply acting as the agent of a foreign company. So, Apple China may be selling items "directly" to Australians, with Apple Australia acting as its agent only. Apple Australia would have an agreement with the ATO that it will declare, say, 2% of the price of each sale as revenue, and Apple China would declare 98% of each sale as revenue.

    Transfer pricing is legal so long as it's not excessive; commissionaire structures are legal so long as they're appropriately negotiated. If Apple is hit with a massive tax bill because of Mr Husic, I will eat my smartphone.

      I'm sure Ed Husic knows exactly how and why Apple pays so little tax, even if it's just because one of his staffers explained it to him. But by going after the biggest fish, even if they're not doing anything illegal, it starts the ball rolling on taxation reform. It's a pretty standard tactic - it creates headlines which creates outrage which makes it easier to make change.

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