Research and development tax concessions would be better targeted at smaller technology companies rather than global giants such as Google, according to Google’s local managing director, Maile Carnegie.
Carnegie is due to appear before a federal parliamentary inquiry into corporate tax avoidance this afternoon and Fairfax reports she will use her opening remarks to call for reform to R&D tax breaks, given Google and its global counterparts are likely to invest in research and development regardless of the tax benefits.
Microsoft and Apple will also give evidence before the Senate inquiry this afternoon, while large mining companies including BHP Billiton, Rio Tinto and Fortescue Metals will front up on Friday.
According to Fairfax, Carnegie plans to tell the inquiry R&D tax concessions are not the primary reason why Google invests in R&D in Australia and smaller technology companies would benefit more from R&D tax concessions.
Carnegie is also expected to tell the inquiry R&D tax refunds should be paid quarterly instead of annually and this would give smaller companies greater access to cash flow.
But Carnegie will also defend the practice of multinational corporations like Google that pay the bulk of their corporate tax bill in the country where their headquarters are located and the intellectual property is created.
In 2013, Google reported its local tax bill as 15% of profits, or $7 million from a profit of $46 million. However, Fairfax reports this figure does not include income earned through its local search advertising, estimated to be worth $2 billion.
Peter Strong, executive director of the Council of Small Business of Australia, told SmartCompany Carnegie’s comments are “very true and it’s nice to hear that from Google”.
“If being called out for not paying tax means people think more about small business, then that’s one benefit,” Strong says.
While Strong says it is tempting to assume Google and Carnegie are taking a “cynical approach to use the moral high ground of small business” to draw attention away from the company’s tax affairs, he says that shouldn’t “detract from what they are saying is true”.
“Small businesses are the people who should be given more leeway with R&D,” he says.
“But one way to pay for that is to make sure others are paying their tax.”
Strong supports Carnegie’s suggestion of a quarterly rather than annual payment of R&D tax refunds, saying the idea “shows an understanding of small business”.
“It’s all about cash flow and we support that as well,” he says.
University of New South Wales economics professor Tim Harcourt also agrees R&D tax concessions should be more widely available, telling SmartCompany the tax benefits of research and development should be accessible to all companies, “not just captured by Google or Microsoft”.
And Harcourt believes the international tech giants do accept something needs to be done about the current structure of their tax payments.
“I think they know it,” he says.
“They know they’ve got some corporate social responsibility.”
Strong acknowledges multinational tax avoidance is a global issue but he says it’s “our issue too” in Australia.
“There is an obvious impact on the budget here,” he says.