Background: Google and Meta pretty much own Australia and the world's ad-basedinternet. Think, Google Search, YouTube, Gmail, Google Maps, Facebook, and Instagram. Together, they pull in hundreds of billions globally... Meta alone is worth over $1.7 trillion USD (roughly three times the entire Australian federal budget).

What happened: Despite their massive presence in Australia, it's surprisingly difficult to pin down how much revenue the two companies actually earn locally. That's because both Google and Meta are very good at moving money around.

What else: The two companies often book their Australian revenue in other countries like Ireland - or they book the revenue in Australia but then transfer it back to other countries. Why? To help reduce their local tax bill. Despite billions flowing through Australia, the ATO collected just $142 million in tax in tax between both companies. This all comes down to something called transfer pricing.

What's the key learning?

💡 Transfer pricing is when companies within the same corporate group charge each other for goods or services. This allows multinational companies to move profit to wherever the tax rate is friendliest.

💡 This means when an Aussie business buys a Facebook ad, that sale often isn't booked in Australia at all. The Australian entity just "facilitates" the sale... while the actual revenue is recorded in Ireland instead. The reason? The corporate tax rate there is 12.5% compared to 30% in Australia. So, the ATO gets a small 'commission' - while the bulk of profits stay offshore.

💡 Back in 2022, the Australian government estimated Meta's real Australian revenue at $4.7 billion. Yet it paid just $48 million in income tax locally. So, governments are trying to curb this tax set up. But it's become a cat-and-mouse game between regulators and multinationals. And for now, the multinationals are still coming out ahead.