Multinationals, which are legally channelling billions of dollars of revenue earned in Australia to low-tax jurisdictions such as Singapore and the Netherlands, could be caught by Labor's proposed policies to apply tougher taxing rules.

Key points: Labor wants to deny multinationals a deduction when they send royalty payments to related companies that pose a multinational tax risk

Labor wants to deny multinationals a deduction when they send royalty payments to related companies that pose a multinational tax risk Labor estimates this would improve the budget bottom line by $680m over the forward estimates and $2.3b over the "medium term"

Labor estimates this would improve the budget bottom line by $680m over the forward estimates and $2.3b over the "medium term" Companies that might be affected include Uber, Google, Facebook, Microsoft, McDonalds, Ikea and Aldi, among others

ABC News has examined the financial accounts of some of the major companies that may get hit with billions of dollars of new taxes under Labor's proposed changes to deny deductions relating to royalties, including Uber, Google, Facebook, Microsoft, McDonalds, Ikea and Aldi.

On Sunday, at Labor's campaign launch in Brisbane, shadow assistant treasurer Andrew Leigh announced that, if elected, the party would move to stop multinationals from getting a tax deduction when they send royalty payments to arms of their own company that pose a multinational tax risk.

On Tuesday, shadow treasurer Chris Bowen said a Labor government would introduce a "Tax Haven Blacklist", including places like the Cayman Islands and Bermuda.

A law firm operating in Bermuda was the subject of the Paradise Papers — a 2017 international investigation into the use of low tax and secrecy jurisdictions by multinational companies and wealthy individuals — which showed how several large firms operating in Australia structured their financial affairs through offshore related companies, including Nike, Glencore and Engie.

The aim is to vet investments from countries that fail to comply with international standards, Mr Bowen said.

$2.3b in revenue up for grabs

Mr Leigh argued the Federal Government's Diverted Profits Tax had not been effective on the royalties issue, and Labor would deny multinationals a tax deduction for questionable royalties paid to a related party overseas by a firm with $1 billion or more of global turnover.

Labor estimates, based on a Parliamentary Budget Office (PBO) costing, that closing the royalty tax "loophole" would improve the budget bottom line by $680 million over the forward estimates and $2.3 billion over the "medium term".

The party did not state which companies would be caught up, but said there were a number of significant global entities that were making royalty payments to related parties, likely in Singapore, Ireland, the Netherlands and Switzerland.

The PBO estimate, based on Labor's specifications, assumes that related party money is not being taxed correctly or fairly, because the overseas jurisdiction where the money is being sent — often the low-tax nation of Singapore — is not taxing as high as it could.

But assistant treasurer Stuart Robert said the policy was "just an attempt from Labor to distract from its $387 billion of higher taxes that are not targeted to multinationals but instead hit retirees, Australian workers, your superannuation, mum and dad investors, push up your electricity bill and cost of a new car and hit small family businesses".

Mr Robert said the Federal Government had been a key player at the G20 and the OECD on setting rules to combat multinational tax avoidance.

"Since 2013, we have implemented a comprehensive suite of measures to ensure multinationals pay their fair share of tax," he said.

"We have gone well beyond what was recommended by the G20 and the OECD and our actions are reaping rewards."

Mr Robert said, while the Government had for the time being set aside its proposal to tax on digital companies' turnover instead of profits, Australia was working closely with other countries to do more through the G20 and the OECD.

Mr Leigh also said Labor had no plans to proceed with a digital tax, but that "we're following the debate very closely with moves by Britain and France in that direction".

Uber goes via Netherlands

The Federal Government's tougher anti-avoidance laws have seen companies restructure and book billions more in sales locally, which should result in hundreds of millions of dollars of more in tax being paid annually. However, the accounts of some of the world's most well-known multinationals, show they are still legally routing billons overseas.

Uber, which last week filed its local accounts for the year ending December 30, 2018, reported Australian revenue of $935.3 million, with a gross profit of $785.6 million.

But $691 million of this was a "service fees" charge, which cut tax payable down to $8.5 million. Of that $691 million at least $499 million was sent to "related parties" — most likely to be the company's headquarters in The Netherlands.

In 2015, Uber told a Senate corporate tax avoidance inquiry that about 25 per cent of each transaction in Australia was routed to its head company in the Netherlands.

This entity — Uber's Netherlands-based wholly-owned subsidiary called Uber International Holding BV — then paid Uber Australia a fee for providing service support in Australia.

A spokeswoman for Uber told ABC News, "we meet all our tax obligations in Australia".

Google, Facebook send advertising revenue offshore

Google recorded $4.2 billion worth of gross billings in 2018, of which $3.7 billion related to advertising and other reseller billings.

It had $49.1 million in tax payable, but a $681,000 adjustment for prior years and a $21.9 million deferment meant Google ended with a corporate tax expense of only $26.5 million in Australia for the year ending December 31, 2018.

Google's 2018 accounts stated that much of its lucrative advertising revenue still gets booked offshore in Singapore, under Google Asia Pacific.

It said its local arm merely "facilitated" the sale of advertising between the advertiser and Google Asia Pacific.

A Google spokeswoman said the company invested almost $1 billion in its Australian operation over the year.

Space to play or pause, M to mute, left and right arrows to seek, up and down arrows for volume. Watch Duration: 3 minutes 14 seconds 3 m 14 s Elysse speaks to Nassim Khadem about Google and Facebook's taxes. ( Elysse Morgan )

Google is also still fighting the ATO on a tax bill it was hit with more than two years ago.

There are estimates Google's tax rate in Singapore is as low as 10 per cent. Google Australia's former managing director, Maile Carnegie, was in 2014-15 brought before the corporate tax inquiry, and while she did not confirm the rate paid there, tax commissioner Chris Jordan later gave evidence revealing it was not much.

Mr Jordan noted that while Google paid some tax in Singapore, "it's a very small amount as revenue booked in Singapore is moved to a tax haven, Bermuda, through a series of licensing fee payments".

"This means the majority of profits made in Australia end up in Bermuda where no tax is paid."

Facebook Australia collected $579.7 million from advertising in 2018. It also made almost $696,000 from what it called "revenue under service contracts".

The company said in its accounts that its local arm simply acts as a reseller of advertising services to Australian customers.

In the end, Facebook paid $454.9 million in costs to an overseas subsidiary — $70 million more than the year before — to arrive at a net revenue figure of $125.5 million. Its 2018 Australian tax bill was $11.8 million.

A spokesman for Facebook said the company complied with applicable tax laws.

Microsoft deals with an entity in Bermuda

Microsoft Australia recorded revenue of $2.28 billion for the year ending June 30, 2018.

A breakdown of this revenue shows that it came mainly from the sale of products ($1.48 billion), while "services and others" accounted for $192 million, and "commission revenue from related entity" was $603 million.

The software giant paid $53.3 million in taxes for the year ending June 30, 2018, on profits of $153 million.

It states in its accounts that its related entity has changed to Bermuda-based entities.

"The immediate parent entity changed from Microsoft Luxembourg International Mobile Sarl (incorporated in Luxembourg) to MBH Limited (14.75 per cent ownership) and RI Holdings (85.25 per cent ownership) in 2017."

Space to play or pause, M to mute, left and right arrows to seek, up and down arrows for volume. Watch Duration: 16 minutes 28 seconds 16 m Taxing times for the multinational ( Jason Om )

Microsoft reached a confidential tax deal with the ATO in August 2017.

But prior to this it was also the focus of the 2014-15 Senate inquiry, where Mr Jordan took issue with Microsoft executive Bill Sample's evidence that there had been $2 billion in software product and service revenue booked in Singapore but only $100 million in Australia.

Mr Jordan said at the time, it was determining whether this split was appropriate, and added that "much of these Singapore profits are paid out as technology fees and end up in Microsoft Bermuda".

A spokeswoman for the company said, "Microsoft sells products and services directly to local partners and customers in Australia, and all revenue from those sales and expenses are reported locally. Our statutory accounts are the best resource for more details."

Ikea, McDonald's pay huge royalties

Swedish furniture giant Ikea has for years paid billions in "franchise fees", royalties and licence payments to its European parent to reduce its taxable income.

It is currently under investigation by the European Commission about whether its tax arrangement with its Netherlands subsidiary allows it to heavily reduce its tax bill on revenue from stores around the world.

Its local accounts for the year ending August 31, 2018, show Ikea's gross profit of $530.6 million in 2018 was reduced via several expenses and fees. Among them was $43.5 million in "franchise fees" and another $129.7 million in "other expenses".

The company ended up posting a $12.7 million loss for the year, and reported a $7.2 million income tax benefit.

Ikea's accounts also show it loaded up with debt, with total liabilities owed to its offshore parent hitting $578.7 million in 2018.

A spokesperson for the company said, "IKEA pays all taxes incurred in accordance with Australian laws and regulations" and the company provided about 4,000 local jobs.

McDonald's pays itself millions in royalties each year, which could come under scrutiny with Labor's proposed laws. ( Wikimedia Commons )

Fast-food giant McDonald's also has a longstanding practice of paying hundreds of millions of dollars of royalties offshore, which reduces its local taxes.

Its financial results for the year ending December 31, 2018, show McDonald's paid its head entity — previously based in Singapore but now based in Britain — a "service fee" of $413.4 million (up from $388.8 million in 2017) to related entity McDonald's Asia-Pacific.

The entire $413.4 million was a royalty fee. By paying that fee offshore, the company's Australian income tax bill was reduced to $133.7 million in 2018 ($131.9 million in 2017).

McDonald's Australia spokesman Chris Grant said the company would assess Labor's proposed changes to see how it may be impacted.

But he defended the company's tax payments saying, over five years, McDonald's Australia has paid $685 million in income tax.

"We pay our fair share of tax locally, we are transparent with the ATO, and we will continue to conduct our business within all standards and regulations," Mr Grant said.

Aldi Australia gives limited tax information

Supermarket giant Aldi Australia's 2018 financial accounts do not reveal its income tax bill at all, nor do they detail its related party dealings.

But Aldi did recently, as part of the Federal Government's tax transparency measures allowing companies to provide greater details about their tax affairs, note that it has "a number of international related party dealings" with other entities in the Aldi SUD Group, which is its German parent.

Its 2017 "Tax Contribution Report" does not say how many millions of dollars gets transferred to its parent company.

Aldi's 2018 financial accounts do not reveal its income tax bill. ( ABC: Charlie McKillop )

But it did reveal an income tax expense of $69.8 million, and income tax payable of $77.2 million, on profits of $219.6 million for 2017.

Mr Leigh told ABC News that companies' related party royalties are an issue the Australian Taxation Office has been concerned about for some time.

Labor's proposed stricter test will apply to transactions subject to the "sufficient foreign tax test" aspect of the Diverted Profits Tax, or with a harmful "patent box" regime.

Mr Leigh said a multinational could still get the tax deduction if the firm could substantiate to the ATO that its royalty payments were not for the dominant purpose of tax avoidance.

"It's important to see where the money is going and, in instances where it looks as though payments are being made to affiliates in jurisdictions in low-tax countries, that would raise a red flag."

Burden of proof back on companies

Jason Ward, the principal analyst at the Centre for International Corporate Tax Accountability & Research (CICTAR) said, "Labor's proposal rightly puts the burden of proof on companies, and not the tax office".

"If royalty payments are not driven by a tax avoidance strategy the company has the ability to provide additional information to make that case."

He said McDonald's use of royalty payments on each Big Mac, paid into Singapore was one example, but that royalty payments were widely used by multinationals, particularly "big pharma", to avoid tax payments where products were sold.

"Even the IMF has now acknowledged that the global tax system is fundamentally out of date and needs to be replaced," Mr Ward said.

The Tax Justice Network's Mark Zirnsak also said it would stop profit getting artificially siphoned from Australia.

"The Senate Economics Committee found in their investigation into corporate tax avoidance that pharmaceutical corporations and digital technology corporations were particularly likely to cheat on paying their taxes through artificial intellectual property payments," he said.

"There is a need to close all the tax loopholes that are detected, as once multinational corporations know there is a way to dodge paying tax, some will also follow suit."

But the Tax Institute's president, Tim Neilson, said denying a tax deduction for the payment of royalties could result in double taxation on the revenue being distributed as royalties, and could deter foreign multinationals from establishing or expanding their operations in Australia.

"They [companies] earn the revenue and it's included in the Australian subsidiary's assessable income," he said.

"Then when the already taxed revenue is passed on to the foreign related party as a royalty, Australian royalty withholding tax is also paid.

"Under current rules, the Australian subsidiary would get a deduction for the royalty paid and therefore there would only be one lot of Australian tax on the amount of the royalty.

"Denial of the deduction means that there is both Australian income tax on the way into the subsidiary and Australian withholding tax on the way out."