We strongly recommend reading testimony given to the Victorian Parliament by Airbnb and Stayz. Victorian Parliamentarians deserve credit for their questioning. Brent Thomas tried to shift the pressure by finally referring to Airbnb Sam McDonagh’s appearance before a Federal Senate Inquiry into Taxation and the use of Tax Havens. Here, a Hansard extract from the Federal Senate’s Inquiry:
2.13 Clearly, tax minimisation was a major driver in locating a company's headquarters and distribution hubs in low tax jurisdictions. But much to the committee's chagrin, the companies would not broach the subject. In some cases, the answers to questions stretched beyond credibility. For example, Airbnb (a US company) ventured that it set up its international office in Ireland principally to access talent:
Mr McDonagh: We closed some of those offices because one of our core values at Airbnb is to simplify. It just was not effective to have all of those offices and all of those people.
Senator EDWARDS: Why Ireland?
Mr McDonagh: I think Ireland is important for a number of reasons.
Senator EDWARDS: What is the No. 1 reason?
Mr McDonagh: I would say that the No. 1 reason we located ourselves in Ireland was for access to great talent.
Senator EDWARDS: Come on!
Mr McDonagh: It is generally the head of our global operations.
Senator DI NATALE: And the corporate tax rate in Ireland had nothing to do with it?
Mr McDonagh: We do not make any long-term decisions for the business based on tax rates.
2.38 The nature of the digital economy provides opportunities for aggressive tax minimisation by allowing multinationals, such as Google, Microsoft, Uber and Airbnb, to deliver services using software platforms that can be located on the other side of the world. For example, Uber and Airbnb, based in the Netherlands and Ireland respectively, provide a platform for the exchange of services between Australians in Australia; yet the financial transactions associated with these services are undertaken in offshore jurisdictions and the Australian subsidiaries are reimbursed for expenses with a margin added on.
2.39 Emerging multinationals, such as Uber and Airbnb, are large enough to be captured by the significant global entity provisions and may choose to avoid the application of the MAAL (and the stronger penalties associated with it) by ceasing to book revenue overseas for the exchange of services between Australians in Australia. By booking revenues here, digital multinationals will move into a tax regime where the parent company will be reimbursed, through transfer pricing, for the intellectual property underlying the digital service. The creation of a permanent establishment should also give the ATO more access to information about the underlying corporate tax structure of these multinationals.
2.40 The committee does not accept the argument that activities within Australia represent only a small proportion of overall value creation, and considers that current transfer pricing principles need to be fully explored and, where necessary, redrafted to ensure that transfer pricing cannot be manipulated to the detriment of Australian tax revenue. For example, if Australian consumers are paying higher prices for goods and services than a comparable product in other countries, then arguably this represents a value creation activity in Australia. Rather than just paying tax on a relatively small net profit margin for distribution services, corporate income tax liabilities could be calculated on the difference between the Australian price and the cost of supply to other countries.
Homes not Hotels Communities not Transit Zones People before Profits
Neighbours not Strangers