Alphabet Inc (NASDAQ:GOOGL) has reportedly changed the structure of its advertising business in Australia so that it can recognize more revenue in the country.
The move is expected to foster more accountability in the company’s ad revenue in Australia and it has been in effect since the beginning of the year. The company made the changes to align with the Australian Federal government’s probe into firms engaging in tax evasion in the country. Alphabet will identify revenue coming in from the sales and marketing of products and services to customers in the country.
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The Australian government passed legislation in 2015 that was supported by former treasurer Joe Hockey. The bill strengthened the country’s tax regulations thus pointing the spotlight on roughly 1,000 major companies that have been underpaying their taxes in Australia. The new law will lead to heavy fines on the companies that will be found guilty of illegal transfer of their profits offshore.
Alphabet is one of the companies that will be audited by the Australian Tax Office for lowering their taxable income through low-tax countries such as Singapore. The company has released a statement claiming that it cannot make an accurate estimate of the financial impact resulting from the changes that took place once they signed the financial report given after the first changes. Alphabet made a pretax profit of AU$50 million in Australia in 2015 compared to AU$58.7 million recorded in the previous year.
The firm paid an income tax expense of AU$2.9 million, thus registering an after-tax profit of AU$47.1 million which is an AU$2 million drop from the amount recorded in the previous year. The tax was, however, a very small proportion of the revenue that Google collected in Australia in 2015 which was AU$502 million while the total revenue for the previous year was AU$439 million.
The company also claims that there was an R&D tax deduction of AU$5.2 million. A research study carried out by University of Technology Sydney academics claims that only 0.54% of Google’s global revenues were taxed through Australia.