"The tax for Google Australia is a combination of sales and marketing and R & D services, that is absolutely paid in Australia, but the taxes paid on our advertising revenue is paid in Singapore."

Her comments come just a day after The Australian Financial Review revealed BHP and Rio were channelling billions of dollars through marketing hubs in Singapore.

When pressed to disclose the revenue Google generates in Australia, Ms Carnegie declined, saying she feared that would breach US financial disclosure rules.

However in the strongest defence yet of the company's complex tax structure, Ms Carnegie attempted to highlight the hypocrisy of criticising global technology companies for using the same approach that Australian mining firms, like Rio Tinto, use when deriving profits from China.

"If you look at someone like a Rio Tinto, they have about 35 per cent of their customer base in China, and they are paying less than one per cent of their tax in China, because their headquarters in Australia is bearing the financial risks and the costs associated with that," Ms Carnegie said.

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"These are international tax arrangements and what Google is doing in Australia is very very similar to what Australian companies are doing outside of Australia. I am not sitting here today trying to defend whether those practices … are right or wrong, they are simply the way the global tax system is currently working and we are trying to operate within that."

Ms Carnegie said it was up to the government to create a different system, which the company would then abide by.


Google did not structure itself based on tax, it was structured in order to be competitive, she said. This also took into account emerging competition from Chinese internet giants like Tencent and Alibaba.

"We are not opposed to paying tax, what we are opposed to is being uncompetitive," Ms Carnegie said.

Maile Carnegie managing director of Google Australia & New Zealand. Christopher Pearce

Simple Apple

Mr King meanwhile insisted Apple had a very simple business model and paid all taxes it owes, in accordance with Australian law. He said Apple Australia essentially buys products like iPads and iPhones from overseas operations, and resells them. It was then taxed on its local profits.

"We purchase our products on an arms length basis from affiliates and declare all of our income in accordance with Australian tax law," Mr King said.

"Very simple, no offshore billing, no corporate debt and no fancy hybrid structures … very simple business model."

However Senator Milne said it was "ridiculous" for Apple Australia to act as if it was a separate company to its global operations and accused it of fixing prices so its operations in lower tax jurisdictions paid less than Australia for iPads and iPhones.


Tony King managing director of Apple Australia & New Zealand. Christopher Pearce

Mr King, however, said he did not know what other Apple subsidiaries paid. He said Apple abided by so-called advanced pricing agreements with the ATO, which agreed upon what price Apple could charge itself, however the current agreement has expired.

"We are following globally accepted transfer pricing principles, we are following Australian transfer pricing principles in everything we do," he said.

Mr King said Apple currently had no idea when the ATO's audit into its tax practices would be completed.

Microsoft structure

Singapore is also the beneficiary of tax for Microsoft goods sold in Australia, such as software, services and its Xbox gaming consoles, Mr Sample revealed. He said only consulting services revenue was billed and accounted for in Australia and reported to the ATO, but non-consulting services and software product revenue was booked in Singapore.

Bill Sample corporate vice president of Microsoft Worldwide Tax. Christopher Pearce

This meant in the 2014 financial year Microsoft booked $2 billion of Australian software products and services revenue in Singapore while only $100 million of consulting service revenue was booked in Australia. Mr Sample rejected the idea that this only occurred because of Singapore's lower tax rates, and insisted it was due to a decision taken in 1991, which designated Singapore as its regional hub.


The committee sought to highlight the convoluted nature of Microsoft's structure by asking about the relationship between Microsoft Australia, Ireland and Singapore and was told by Mr Sample that Microsoft Australia is not related in its legal structure to the other operations, they are effectively individual businesses. Mr Sample himself works for Microsoft Corporation in Redmond, Washington.

"Why are you here if you have nothing to do with this lot in this country?" Senator Milne asked.

Mr Sample said he was simply the person best able within Microsoft to answer questions about global tax.

Dissatisfied with the tech chiefs' inability to answer questions about the prices it charged itself for local products, and how much of its revenues were sent overseas, Senator Nick Xenophon said he intended to recall them for future questioning, although it is unclear whether that will occur. In concluding the session, Committee chair Sam Dastyari said he was disappointed in some of the answers provided.

"I think it is pretty alarming that some of you would come to an inquiry like this without basic information about where revenue is going and where the Australian sales are going," Senator Dastyari said.