The tax goes to Ireland, where the corporation tax rate of 12.5 per cent is considerably lower than the US threshold of 35 per cent and Australia's 30 per cent. That explains why Google Ireland reported a whopping €5.2 billion ($9.2 billion) turnover for the year ending December 31, 2007. It is thanks to the likes of Google that Ireland was able to call itself the Celtic tiger, and not a Celtic pussycat.

This simple transfer pricing arrangement has allowed Google to claim its Australian revenues are $90 million when the real figure is much, much larger. The problem is that no one really knows how much revenue it gets from its Australian operations. The US Securities and Exchange Commission stipulates any country that contributes more than 10 per cent of a company's revenues must be broken out in its accounts. That explains why the only two countries that are listed on Google Inc's accounts are the US and Britain, leaving the other 23 countries in which it operates largely in the dark. Depending on who you talk to, estimates of the size of Google's business in Australia vary from $600 million to $800 million.

Every quarter, Google plays a game with PricewaterhouseCoopers, the auditor commissioned by an industry body to collate figures from all the major online businesses, including Google. In order for PricewaterhouseCoopers to build an accurate picture of the market's size, the online businesses, which include Fairfax, News Ltd, Yahoo! and Sensis, supply the auditors with their revenue figures in confidence. All but Google, that is.

So it is left to the man from PricewaterhouseCoopers to play a little game, where he rings Google and quotes a figure back to a senior executive. He is then told whether he is hot or cold. Google's profit margins in Australia are among the highest in the world at 70 per cent, so the company is avoiding a possible tax bill in Australia of up to $160 million. Last year it paid just $3.9 million. And Google is not alone. eBay bills out of Switzerland, Yahoo! Search Marketing also bills out of Ireland, Facebook bills out of the US. Microsoft uses an Irish subsidiary, Round Island One, which reportedly controls about $US16 billion ($20 billion) of Microsoft assets. They are all doing it.

But for how much longer is uncertain. Two weeks ago the US President, Barack Obama, called for an end to the practice by 2011. In Britain, Google is feeling the heat from politicians and the media after a newspaper revealed the company was paying only £600,000 in tax ($1.2 million) on local revenues of £1.2 billion. Furthermore, Google Ireland is owned by entities based in the tax haven of Bermuda.

The Australian Tax Office's insouciance with this situation is breathtaking; there's even a website advising companies on how they can get away with it. The Tax Office declined an opportunity to comment, as did all of the companies involved. The irony is that the very people Google sees as its future customer base - small businesses - are taxpayers. Google's informal company motto is: "Don't be evil". Put that in your search engine, Google, and smoke it.