Apple plays hard ball at tax inquiry

Australian senators have lashed out at the local boss of technology giant Apple over a perceived lack of transparency in a committee hearing on tax minimisation yesterday.

Tony King, Apple's managing director of Australia and New Zealand, joined executives from Microsoft Australia and Google Australia in front a senate committee investigating tax minimisation strategies.

The Google and Microsoft executives came clean on what portion of their local profits were booked overseas during the almost two-hour grilling, but King was widely criticised by the panel for refusing to reveal the details of Apple's tax structure.

King argued that Apple had no strategies to reduce the amount of tax it pays in Australia, and said the company clearly accounted for all its local costs and revenue. 

But he said he was unable to detail what portion of the $6 billion revenue Apple booked last year went overseas.

“I find it extraordinary that you can’t answer that. I'll have to ask you all to appear again,” senator Nick Xenophon said.

"I'll take in on notice," King said.

"Do you not know or are you not telling us?" senator Sam Dastyari asked.

"I don't have the figure," King said.

King similarly said he could not break out what portion of the iTunes revenue derived from the Australian sale of an Australian song goes overseas.

He said Apple Australia had a "very simple business model". 

"We book all of our revenues to do with Australian sales here in our books in Apple Australia," King said.

"We purchase our products on an arms-length basis from affiliates, we book all the costs in Apple Australia's books, we declare all of our income in accordance with Australian tax law, and we pay all taxes that we owe.

"No offshore billing, no corporate debt, no fancy hybrid scheme, a very simple business model."

The company reportedly shifted $9 billion in Australia profits to its Irish parent in the 10 years prior to 2013, thanks to a pattern of increasing mark-ups on products sold to Apple Australia via its Irish parent company.

King denied suggestions Apple was inflating the transfer price of goods to a point where it could lower gross profit to minimise taxable income.

"Not at all. Our product cost is determined on an arms-length basis."

King also pointed to the now-expired advanced pricing agreement (APA) Apple Australia maintained from the early 1990s until recently with the ATO, which allowed Apple to pay a set amount of tax ahead of time.  

"The APA process is a very rigorous and thorough process that is a framework which ensures the product cost in the transfer pricing concepts is fairly stated on the product being brought in by multinationals to Australia," he said.

Greens Senator Christine Milne put to King that Apple subsidiaries globally were price fixing products in order to maximise expenses and minimise tax contribution in higher-taxing regions like Australia.

King said he was not familiar with Apple's global tax practices, but rejected the assertion.

"We are following globally accepted transfer pricing principles and Australian transfer pricing principles in everything we do," he said.

"You're sitting here saying you're just familiar with Australian tax arrangements and the local Apple subsidiary. What I am saying is it is ridiculous to regard you as a single entity when you are part of a global company that is avoiding tax," Milne said.

"We do not avoid tax, we pay all of our taxes that are due in the Australian market by law," King responded.