Global tech companies to pay up as Australia gets its own 'Google Tax'

Tech companies have become infamous for moving their profits around the world in search of favourable tax rates, and now Australia wants to make sure they are paying their fair share.

In the 2016 federal budget, which the government unveiled Tuesday night local time, Treasurer Scott Morrison introduced a series of measures designed to discourage multinational tax avoidance.

A new diverted profits tax -- or so-called Google Tax -- was a key part of the platform. From July 2017, it aims to claw back tax with a penalty rate of 40 percent from companies that use artificial arrangements to move profits earned in the country offshore. 

For multinationals with global incomes of more than A$1 billion, the maximum penalty for failing to file proper tax documentation on time has been raised from A$4,500 to $450,000. A new Australian Taxation Office taskforce of "more than 1,000 specialist staff" will also be created to hold multinationals and super wealthy individuals to account.

"Everyone has to pay their fair share of tax on what they earn here in Australia, especially large corporates and multinationals," Morrison said in his budget speech. "These measures, including from the multinational tax avoidance legislation, will raise an additional A$3.9 billion in revenue over the next four years."

The move follows tax transparency legislation the government passed in late 2015, which aimed to force hundreds of Australia's largest companies to be more transparent about their tax bill.

In 2015, Apple, Google and Microsoft were among the international tech giants made to face the Australian Senate to account for the low levels of tax they paid in Australia compared to their profits. At the time, then-managing director of Google in Australia, Maile Carnegie, admitted Google Australia's profits were mostly taxed in Singapore.

In what appeared to be a preemptive attempt at conciliation, Google indicated in April it would ensure its 2016 Australian advertising revenue was taxed in-country. 

The government's proposal is modelled on the UK's Google Tax, which was introduced in 2015 to discourage companies from routing profits through countries with lower tax rates, such as Ireland or Bermuda. 

In February, Google paid the British government a £130 million (A$248 million) tax settlement, although the amount was immediately criticised as being too small.

Whether the government's budget proposals ensure Australian money stays in Australia remains to be seen.

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