Tuesday 24 May 2022 | 13:57 | SYDNEY
Tuesday 24 May 2022 | 13:57 | SYDNEY

Getting serious about IP and tax


Stephen Grenville

21 November 2012 09:29

Intellectual property rights are usually debated in terms of the balance between the rights of the user and the producer/owner.

But there are also important implications for international taxation. With intellectual property forming such a large component of many products we buy, the nebulous nature of IP opens opportunities for companies earning substantial Australian sales revenue to largely avoid Australian tax. These multinationals locate their IP in Singapore, the Bahamas or Ireland and charge a hefty fee for IP services in calculating their Australian profits. Thus the profits are shifted to the tax haven.

Apple's Australian revenue last year was $4.87 billion, yet it paid tax here on a $190 million profit. Google, with Australian advertising revenue estimated as high as $2 billion, paid tax of $74,176.

This could be corrected if more realistic transfer pricing were to be enforced. Or the international community could take effective measures to end tax havens. Neither of these possibilities seems feasible any time soon.

Meanwhile, Australia goes on losing tax revenue for which we have, at the very least, a strong moral claim. The income is earned here, selling products to Australians, and intellectual property is protected by our legal system for the benefit of companies which make little contribution to the taxes needed to maintain this economy.

When international treaty discussions come to discuss intellectual property rights, the tax implications might usefully be included.

Photo by Flickr user Alan Cleaver.