Really Google!? ‘Don’t Be Evil’

You could be forgiven if you missed the article in the business pages of the SMH on the weekend (17th Nov 2012) titled “Tax minimization schemes – How Savvy Multinationals are Curbing their Tax Bills” by Ben Butler and Georgia Wilkins.

Not the most arresting title in a section of the paper that your average Joe probably doesn’t frequent all that regularly. I should say, I’m not an avid reader, but generally flick through the section most weekends, scanning for articles that might be of interest to me and relevant to a number of business’ I’m involved in. This process is made somewhat easy, as the industries that I’m most interested in are the computer, IT and Internet sectors who, over the recent decades, have incubated some of the worlds’ most successful and iconic brands including Apple, Amazon, eBay and of course Google.

As a result of this fame and fortune, the newspapers themselves love to leverage these monolithic brands, by using the logos of these companies as sign-posts to attract the reader’s attention – and attract my attention, (last Saturday), they certainly did. Not, however, just because of their well-oiled marketing technique, the article is a great piece of investigative journalism on the tax avoidance practices on some of the world’s most loved and respected brands.

You should firstly know a bit about me so that you can understand my perspective on this. Just before heading to bed last night, I booked a cab to the airport via my Apple iPhone via an app I’d previously down loaded through the Apple App store, I checked into my flight on an m-site and received my boarding pass as an MMS. I spent the 20 mins cab ride to the airport this morning singing the praise of progress and innovation to my Belarusian born driver on my way to work (at a digital communications agency). To say I’m an advocate of the Internet and innovative practices would be a serious understatement.

So when I read Ben and Georgia’s report, I was as shocked as I was mortified, and was catapulted back to the days of the boom (and subsequent bust). A time where the word ‘Internet’ only summoned up feelings of disdain and disgust for the average Joe who’d invested his life savings into the magic of the Internet, before having it very quickly ripped away from him as ‘savvy’ businesses used their corporate trickery to extract every last dollar from his pocket.

Well, it feels like it’s happening all over again, but on a scale that is only one step removed from these big businesses putting their proverbial hands in everyday Australian’s pockets, taking the money that we earn and depositing in off shore ‘tax efficient’ havens and depriving the country of hundreds of millions of dollars that should rightly be being used to fund public projects such as healthcare, education and infrastructure.

Don’t get me wrong, I have actually heard about businesses using off-shore accounts to ‘efficiently’ tax their incomes, but I really thought that ‘those’ businesses were the unscrupulous; the dodgy online casinos, the porn sites and the Nigerian money launderers, not the brands we know and trust.

Here’s an extract of the article to bring you up to speed:

“An Australian business buys an advertisement on Google Australia, aimed at luring Australian customers to its Australian website. According to Google, this transaction takes place in Singapore.

It used to take place in another low-tax jurisdiction, Ireland, but in May last year Google switched to Singapore ”to provide a better online advertising experience”.

“Revenue reaped from Australia and other countries in the region, including Bhutan, the Philippines and Pakistan, flows directly to Google Asia Pacific, headquartered in the Lion City.”

“Estimates of Google’s Australian advertising revenue reach as high as $2 billion a year, but none of that money passes through its local subsidiary.”

“Instead, Google Australia subsists on services income from a head office in the US and Google outposts in Singapore and Ireland.”

It declared a loss of $3.9 million last year, and paid just $74,176 in Australian tax.” (1)

Yes, that’s right; Google made and estimated $2 BILLION dollars in revenue last year. And they paid less tax than $75 THOUSAND in tax.

The irony, as the article points out, is that at a recent event in Sydney, the Google Australian CEO, Nick Leeder, accused the government of being a “conservative thinking country” by not investing more taxpayer money in the National Broadband Network (NBN). Investing what money I hear you ask? The money that Google should have been paying in Australian company tax were it operating in this country, with any integrity. (The NBN by the way is an infrastructure project that Google will be a massive beneficiary of.)

Really Google?! “Don’t be evil!”?*

But Google are not the only ones. Another comment in the report states:

“Paperwork filed with corporate regulators around the world reveals the Australian arm of Apple, Google and eBay form part of these structures, held at arms lengths from their US parents through intermediary companies located in tax havens.”

Apple Australian revenues reached $4.87 billion last year. It’s most recent tax bill was paid on $190 million profit.” (That’s $57 Million in tax or 1.14%, not the expected 30% that other Australian based businesses’ are paying.”

These are the brands we know and trust, the brands we love and respect. Aren’t they?

Positive Change

But there is hope on the horizon, ‘Positive Change’ as it were.

The article revealed that the tax office has begun fighting these corporations and has hit Apple with a $28.5 million dollar bill for back taxes (although I’m sure this is only a drop in the ocean of what should be paid). “Last month the federal government announced changes to its transfer pricing laws, making it harder for companies to shift profits from high –tax regions to low-tax ones.” These are no doubt complicated laws that cross over international borders that no doubt take many years of policy makers time and an expense of lawyers to sure up.

Parting Questions

(For anyone who wants to wade into the conversation)

1) Why is this article not front page news on every newspaper in Australia?

2) Why is Gerry Harvey chasing the GST on ecommerce purchased items valued less than $1000 brought into the country through sites like Ebay and not focussing his media clout on this issue?

3) Why when I told my Belarusian cab driver this morning about the injustice that was going on, he replied excitedly by asking, “Do you have the iPhone5!?”

*“Don’t Be Evil.” – Google’s informal corporate motto originally suggested by Google employees Paul Buchheit and Amit Patel (the creators of Gmail)(2)





  1. 1) It’s been going on for aeons. Companies as large / established as Johnson & Johnson have similar practises. Running a local office at a massive loss, with all revenue going through a “tax haven”. These “Tax havens” are a globalisation problem. It’s the now high-profile EU problem of “collective economy, local autonomy” that prevents economies like Singapore from being FORCED into have a responsible tax rate. If they did, their economy would completely collapse…

    2) Gerry Harvey is old-school – just like this idea. I wouldn’t be surprised if he was partially caught up in this kind of accounting.

    3) Brainwashing.

  2. Don’t get me wrong, I’m not naive enough to think that this has not been going on since, well, for a couple of decades anyway (maybe not aeons). But BILLIONS of dollars from companies that use the motto “Don’t be Evil”?? is seriously wrong and the world’s most loved brand?!?! Apple. Surely everyone doesn’t’ know that these guys are ripping-off every day Australian’s from millions of dollars. Or do they?

    Question: Does everyone reading this blog think that Apple are paying (approx.) the 30% company tax on all revenues made in this country?

    Rusty, do you?

    Do you think it is OK?

  3. I don’t think everyday Australians appreciate the complexity of international tax-dodging… I don’t even get it really…

    I think it’s a horrible (largely accepted) side-effect of globalisation, and definitely not OK… But have global governments have evolved to cope with it? Or can they? Or do they need to just legislate against it?

    Would you be happy paying an extra 25% for your iPhone in Australia, and be locked-out from purchasing it anywhere else?

  4. My two cents on this… First, shameful. Second, I kept thinking that this is the equivalent of me coming to Australia on a working visa (as I am very proud to be), and finding ways to dodge paying taxes while employed here. As a new resident in this country, I feel that paying my fair share is the least I can do as I directly benefit from a wonderful lifestyle, healthcare system, roads, infrastructure, etc. Not everyone shares this belief, of course, but if it’s perceived as okay for individuals to dodge paying their way, it’s not too hard to figure out where corporations get the idea.

    I think your excellent article also speaks to something we struggle with in our day to day work: when brands’ behaviour doesn’t align with their brand values. Google’s brand values say: “don’t be evil” but what do their actions say?

  5. A great article Matt, some very good points. My opinion:

    1) Media outlets know that an anti- Apple / Google movement led by them would most likely take up a lot of paper / airtime on public education and ultimately fail. The media (relatively) widely reported on the Foxconn suicides, and people still bought iPhones in record numbers:
    If a human life is not enough to come between me and the new iPhone, an abstract topic like tax evasion is unlikely to do the trick (and unlikely to sell ad space):

    2) Gerry Harvey evidently thinks that blaming his inflated prices on GST is easier for the masses to understand and get behind than trying to boycott online companies due to their creative accounting practices. Your average Aussie has a harder time caring about theoretical tax dollars than the $10 extra I have to pay out of my own pocket (even if the long-term result is similar).

    3) Your Belarusian cab driver has difficulty comprehending the intricacies of international trade law, but loves that the iPhone5 comes with oval shaped headphones

    Companies are primarily in the business of satisfying shareholders, so they aren’t going out of their way to be evil – it’s just more profitable to do certain things in an “evil” way. That doesn’t make it ethical, but until it becomes unprofitable, they will keep doing it.

    As a consumer the best thing you can do is to buy and advocate brands who are at least doing something less evil than the rest. Here’s a great example:

  6. Thanks for all your comments guys. Hope you have a great Christmas break. Do us a favour and when you are buying those last minute Chrissy presents, please try and buy something that not only supports the struggling Aussie retailer but also supports every single person who lives in this fine country of ours.

    Till next year!

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