Uber claims it is not avoiding Aussie tax as it is not profitable
An Australian Senate inquiry into the tax avoidance of multinational companies continued in Sydney yesterday, when Uber appeared before the Senate Economics Committee to discuss the funnelling of revenue offshore to the Netherlands. In his opening statement, Brad Kitschke, Uber director of public policy in Australia and New Zealand, said the company, which he still considers a start-up, is not avoiding tax and believes this has been misrepresented in the media. "We are unlike other, more mature US tech companies," he said. "First, and simply, we are not yet a profitable company, and as you are aware, companies are taxed on profit, not revenue."

Australia’s tax commissioner has launched a strongly worded attack on Uber at an inquiry into corporate tax avoidance, arguing the ride-sharing service liked to portray itself as the weaker party in a David-and-Goliath battle when it fact it was the big multinational player.

Uber is challenging an Australian tax office ruling that all drivers must register to collect the goods and services tax, regardless of whether they are likely to meet the $75,000 annual turnover threshold that applies to other small businesses.

The company’s director of public policy for Oceania, Brad Kitschke, said the ruling was unfair because it treated a person who wanted to try ride-sharing for an hour or two a week differently to a person who set up a lawn mowing or courier business.

“We don’t think that it is appropriate that the tax office has essentially applied a 1999 law to what is a brand new business model that didn’t envisage this type of activity and treats people who do ride-sharing fundamentally differently than other participants in the tax system,” he told the Senate’s economics committee on Wednesday.

But the tax commissioner, Chris Jordan, hit back at the company during his subsequent testimony to the same hearing in Sydney.

“What Uber wants is a change in the law. It doesn’t like the outcome of an application of the law and I think it’s a classic example of challenging the process when you don’t like the outcome,” Jordan said.

The ruling at the centre of the dispute classifies ride-sharing services as taxi travel services for tax purposes. The GST laws require people who provide taxi travel services to register for GST regardless of their turnover.

Jordan said he thought it was “a relatively straightforward thing that their drivers are operating taxi-related services” and if Uber did not like that fact it should lobby politicians to change the law.

You came to a Senate corporate tax inquiry and didn’t work out how much tax you paid last year? Sam Dastyari

“Being innovative doesn’t mean you don’t meet your tax obligations,” he said.



“I sometimes sense they play this sort of David and Goliath thing but they’re actually the Goliath here. They operate in 64 countries, they’re a multinational enterprise valued at over $50bn US ... there’s this [appearance of being a] selfless, for-community-good young startup in the garage.

“Good on them, but they’re the multinational enterprise here that operates across borders with as you heard from the evidence the classic structure of booking the sale outside of Australia, having a force of people here that add no value.”

The committee hearing shone a light on the challenges facing lawmakers and regulators as they grapple with the rise of digitally promoted “crowd-sharing” services that challenge established operators in the taxi and hotel industries.

Senators conducting the inquiry into corporate tax avoidance acknowledged the growing popularity of Uber and the room-sharing service Airbnb but raised concern over the prospect of eroding Australia’s tax base.

Both companies defended their corporate structures, which allow payments to be processed offshore for ride-sharing trips and room rentals that physically occur in Australia.



Uber and Airbnb representatives told the inquiry they were “technology companies” which created value via the global platforms that connected drivers with passengers and home owners with visitors. The booking platforms were run by holding companies in the Netherlands in the case of Uber, and Ireland in the case of Airbnb.

The Senate committee heard that if somebody paid $100 for a ride-sharing trip, Uber’s Dutch entity retained about $25 and sent $75 to the Australian-based driver. The Dutch company also pays the costs of running Uber’s small marketing operation in Australia plus 8.5%. This marketing and support entity pays corporate tax in Australia.

Kitschke said Uber drivers received 75% of each fare, which they could then spend in their community. “The vast majority of the money stays local,” he said.

“The transaction has occurred between the driver and the rider with an overseas company, but the lion’s share remains in Australia.”

When asked whether the portion kept by the offshore company would ever be seen again by the ATO, Kitschke said: “Indirectly, yes; so Uber Australia is paid a fee by a Dutch entity to conduct activities in this jurisdiction of costs plus 8.5%.”

He added: “Uber Australia doesn’t generate revenue, the Dutch company generates revenue, the platform generates the revenue.”

Kitschke confirmed that by the end of the year the company would have about 100 people employed in Australia for the support functions, excluding the drivers who operate via the offshore platform.

But he was unable to say how much tax was paid last year. The Labor senator Sam Dastyari said: “You came to a Senate corporate tax inquiry and didn’t work out how much tax you paid last year?”

Kitschke replied: “I can find out the specifics and get back to you in a very short period of time.”

Kitschke welcomed the Australian Capital Territory’s decision to introduce “sensible regulations” for the ride-sharing service, saying the territory government acknowledged Uber was different to taxis.



The committee was also told that Airbnb hosts who provided a room to someone for $100 would be paid $97 of this amount.



Airbnb’s Australian manager, Sam McDonagh, said the company complied with tax laws and encouraged hosts to do the same. It had a small team in Sydney.



“I’m unable to disclose as a private company the amount of profit that we [the Australian entity] reported in 2014, but I can say our effective corporate tax rate was 37% on that,” he said.

McDonagh emphasised economic benefits, saying guests stayed longer and spent more money in the area than tourists. He said the service was experiencing rapid growth in western Sydney and outer Melbourne suburbs.