Google’s chief economist Dr Hal Varian is of the opinion that his employer should not pay “excessive” tax on its Australian revenue because this money is derived due to its “intellectual capital” which mostly resides in California.
During a chat with the ABC’s PM program on Thursday, Dr Varian claimed that imposing taxes in the place where value is created was the norm in international corporate taxation.
It’s a pity that the ABC let this go through to the keeper and failed to remind Dr Varian that Google is essentially an advertising company that gets the majority of its revenue through incredibly well-targeted ads.
And that targeting is done through the accumulation of a wealth of personal data — through search queries (of which there are about 3.5 billion a day), location targeting and snooping on Gmail users, to mention some avenues — which ends up in the custody of a company that is now contemplating doing business in censorship-happy China.
So why shouldn’t the search behemoth pay taxes on the money earned from Australian advertisers? It’s a pity the PM host did not pose this question to the good doctor.
Dr Varian is in Australia because the Federal Government has suddenly shown some commonsense and is contemplating advice from the Treasury which would impose tax on high-tech companies based on their revenue, and not their profits.
This is an idea that has been stolen from the European Commission, the executive arm of the European Union, but nevertheless it is laudable that Canberra is finally even thinking of this.
In the case of the EC, a proposal was unveiled back in March to apply a blanket 3% tax on digital companies that had annual worldwide revenues of €750 million (US$925.6 million) and EU revenues of €50 million.
ABC’s PM host also goofed when asking Dr Varian about the company’s plans for re-entering China. He mentioned something about the company not having any definite plans but only considering such a move.
The PM host was obviously unaware that on Monday Google chief Sundar Pichai spoke openly about the China project — codenamed Dragonfly — for the first time, telling a conference that what had been developed so far was “very promising”.
Hence, this went through to the keeper as well.
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