Search giant Google paid $85 million in tax in 2021 despite earning more than $7 billion from the local economy, shifting the majority of earnings to an international subsidiary which reduced the size of its profits.

Financial accounts lodged on Thursday with the corporate regulator for the 2021 calendar and financial year show Google’s gross revenue in Australia grew 38 per cent to $7.2 billion in 2021, a major increase and a fresh high. Advertising revenue hit $6.1 billion, up from $4.4 billion the previous year.

Google said its net revenue, which excludes certain costs of sales, was $1.7 billion, up from $1.4 billion the year before. As a result, Google made a pre-tax profit of $404 million in 2021 compared with $239 million in 2020. Its company tax bill rose to $85 million from $76 million.

The search giant did not break out how much it was paying under newly struck multi-year commercial deals with media companies such as Nine Entertainment Co (owner of this masthead), News Corp Australia, publisher of The Australian, The Daily Telegraph and The Herald Sun, and Seven West Media. These deals were completed through an international subsidiary.

A Google spokesperson said the company had invested $1 billion in its local operations.

“Over the next five years, through our Digital Future Initiative, we plan to invest in infrastructure, partnerships, and technology research including an Australian Google Research hub,” the spokesperson said.

Companies pay taxes on profits, not revenue. However, tech companies have been criticised for funnelling money generated in Australia through offshore subsidiaries to reduce their local profits and minimise their tax bills. Despite most of its money moving offshore, Google is publicly supportive of the OECD’s efforts to reform the global tax system and is a voluntary signatory of Australia’s Tax Transparency Code.

Loading

The revenue growth skyrocketed in the same year that Google was busying striking commercial deals with local media outlets in response to legislation introduced by the Australian government. Google initially threatened to remove search from the Australian market to avoid the laws that would have forced it into commercial negotiations with media companies or risk fines of up to 10 per cent of revenue.

It ended up co-operating with the government following discussions between Google CEO Sundar Pichai and former treasurer Josh Frydenberg that gave the company a loophole.Google’s local deals are part of a $US1 billion commitment to partnerships with news publishers.

The Business Briefing newsletter delivers major stories, exclusive coverage and expert opinion. Sign up to get it every weekday morning.