Home World Business Facebook Australia pays more tax following government crackdown against multinationals

Facebook Australia pays more tax following government crackdown against multinationals

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Facebook Australia has restructured its local business and for the first time ever counted its lucrative advertising revenue following the Turnbull government’s tougher laws aimed at stamping out multinational tax avoidance.

The social media giant is among a number of other tech giants including Google that have restructured their business in response to the federal government’s tougher anto-avoidance measures including the Multinational Anti-avoidance Law (MAAL) and the Diverted Profits Tax.

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Facebook local accounts for year ending December 31, 2016 reveal local revenue of $327 million, up from $33.6 million the year before.

For the first time ever Facebook has reported its advertising revenue. It came in at $326.9 million, according to its accounts filed with corporate regulator the Australian Securities and Investments Commission (ASIC).

Facebook's tax has risen. Facebook’s tax has risen. Photo: NYT

Facebook’s income tax expense increased to $3.3 million, up from just $814,000 the year before.

“We reviewed our business model and decided to restructure the Australian operations,” the company said in the financial statement, noting that the change was a result of the Multinational Anti-avoidance Law (MAAL) passed on January 1 2016.

“Under the new arrangement the company was converted into a local reseller of advertising inventory and concludes all sales contracts with customers managed by the sales team in Australia.

“These customers will no longer have a contractual relationship with Facebook Ireland.

Facebook's founder Mark Zuckerberg Facebook’s founder Mark Zuckerberg Photo: AP

“The new structure is transparent and easier to understand.”

Investment bank Morgan Stanley had previously estimated Facebook earns between $500 million and $600 million from advertising in the Australian market. 

Mark Zuckerberg's Facebook is for the first time counting local advertising revenue in Australia rather than Ireland. Mark Zuckerberg’s Facebook is for the first time counting local advertising revenue in Australia rather than Ireland. Photo: Paul Sakuma

Facebook reported a profit of $3.1 million for the year ending 2016. The year before it recorded a $970,000 loss.

Facebook Australia has been contacted for comment.

A 2015 Senate inquiry into multinational tax avoidance had criticised technology companies including Apple, Google and Microsoft for failing to count lucrative advertising revenue, and/or shifting profits to low-tax or no-tax nations such as Singapore and Bermuda. It was revealed they were among a number of multinationals under audit by the Australian Taxation Office (ATO).

Tax Commissioner Chris Jordan is looking to hit multinationals with tax bills amounting to $4 billion. The tax assessments include $2.9 billion in tax liabilities already issued against seven multinational companies.

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