The Australian

By Fran Foo

Jeff Bleich, the former US ambassador to Australia, has backed the staunch defence of American technology giants Google and Microsoft against corporate tax avoidance claims, rejecting suggestions the companies were “shifting” profits offshore.

Last week’s explosive Senate tax inquiry revealed that Microsoft and Google had been routing the bulk of their Australian sales through low-tax Singapore and, along with Apple, were being ­audited by the Australian Taxation Office.

Google’s local head Maile Carnegie said Australian companies that bought online advertising from Google Australia were being billed by Google Singapore.

Microsoft’s global tax chief, Bill Sample, explained that $2 billion in software products purchased in Australia had been booked in Singapore.

For example, JB Hi-Fi would be billed by Microsoft Singapore for all copies of Microsoft Office it sold in Australia, he explained, arguing this had been “standard practice” since the 1990s.

Singapore has a corporate tax rate of only 17 per cent compared with Australia’s 30 per cent.

“They’re not shifting anything (and) these are not tax avoidance systems,” Mr Bleich told The Australian in an interview.

“These are systems that were put in place with the full knowledge and concurrence of governments because they wanted to get the full advantages of these companies’ products for their citizens.

“Google structured itself and made investments based upon those expectations and (they’re saying) now that we’re no longer a small start-up and wealthier, now you want to change the rules on us? Our systems were based on the same confidence, reliability and certainty in your legal and tax systems.

“So I’m not surprised to see US companies pushing back,” he said. Mr Bleich said companies would react adversely to sudden changes to “established expectations” unless it involved a more effective regulatory environment which had “more predictability, certainty and fairness for the company versus its competitors”.

Post his ambassadorship, Mr Bleich wears many hats and is a partner at Munger, Tolles & Olson in San Francisco where he heads the global practice specialising in trade, international dispute resolution, and data security.

He also advises US companies looking to expand offshore.

Speaking on cybersecurity at Sydney University yesterday, Mr Bleich said it was “incredibly important” to engage closely with China in tackling cybersecurity and cyber espionage issues.

“At this point the internet is still at a wild, wild west stage ... there aren’t a set of clear rules that apply across countries.”

Mr Bleich said one of the frustrations for the US government “has been the sense that elements within China have not drawn the distinction between private ­sector information and public sector information”.

“To the extent that they’re trying to obtain information about the US, they have been exfiltrating valuable IP (intellectual property) from private US companies — so that’s a major challenge,” he said. Mr Bleich is visiting Australia after recently attending ­President Barack Obama’s cybersecurity summit at Stanford ­University.

This article was originally published at The Australian