GOOGLE has paid no tax on an estimated $940 million in web search advertising revenue generated locally, instead routing its Australian online ad sales through an Irish subsidiary, Google Ireland.
This week, Google Australia reported a net loss of $3.9m on operating revenue of $201m for the year ended December to the Australian Securities & Investments Commission.
Tax authorities don’t get a look at income generated within Australia by its search advertising business, which is booked offshore through the Irish entity. In turn, Google Ireland is managed from Bermuda.
While Google Australia refuses to comment on internal financial and billing arrangements, local digital media analysts Frost & Sullivan puts its share of the local search ad sector at 88 per cent of a $1.07 billion pie.
“We estimate Google’s market share on an annual basis, most recently in June last year, and they held almost 90 per cent of the market,” F&S senior research manager Phil Harpur said.
“That’s for Australian ad revenue, from search advertising only.
“That percentage has been reasonably stable for the past three years.”
Instead, the local arm reports its earnings of $201m comprise payment for sales, marketing and research and development services provided to its US-based parent, Google Ireland and Google Asia Pacific.
Google Australia continues a loss-making trend: in 2010, it reported a net loss of $3.1m on operating revenue of $151m; in 2009 it incurred a net loss of $4.4m on $110m in revenue, while in 2008 it had a loss of $8.8m on revenue of $90m.
Its preference for channelling income through low-taxing nations has attracted examination of the US Internal Revenue Service.
According to Google Ireland’s latest return, annual turnover was E10.1bn ($12.9bn) in the financial year ended December 2010, up E2.2bn over the previous year due to increased advertising revenues generated by Google’s paid clicks from its own and members’ websites worldwide.
The Irish arm reported a profit of E1.7m on the E10.1bn in revenue in 2010.
Meanwhile, Google Inc reported total revenues of $US10.65bn for the first quarter of the 2012 financial year, up 24 per cent over a year earlier.
Revenues from outside the US were $5.8bn, representing 54 per cent of earnings for the period. The company notes that the US and Ireland are its two major tax jurisdictions.
A Google spokesman yesterday said on its tax situation: “Google complies fully with all relevant tax rules in all the countries in which it operates, including in Australia.”