Temu happy to take our cash but not to pay corporate tax in Australia

Discount e-commerce platform Temu is unlikely to pay significant corporate tax to Australian authorities with the Chinese-owned parent company operating from known offshore tax havens.

Temu has launched an aggressive advertising campaign across social media platforms including Facebook and TikTok as cost of living pressures push consumers towards bargain options and retail spending falls in Australia.

The discount marketplace sells consumer products at aggressively discounted prices such as handheld vacuum cleaners for $12.31 and is believed to be trying to imitate the rise of Chinese fast fashion brand Shein.

Analysis of filings lodged with the United States Securities and Exchange Commission indicate Temu’s parent company PDD Holdings, also the owner of Chinese online retailer Pinoduoduo, has structured the company to minimise paying tax.

Temu’s parent company PDD Holdings last year moved its headquarters from China to Ireland, which has a headline corporation tax rate of 12.5 per cent and is home to the headquarters of tech giants such as Meta and Apple.

Temu has yet to lodge any financial accounts with Australian regulators but PDD Holdings subsidiary WhaleCo registered with the corporate regulator in May last year.

According to the latest annual report, PDD Holdings is registered in the Cayman Islands, which does not impose a corporate tax and is an established tax haven.

Centre for International Tax Accountability and Research principal analyst Jason Ward said it appeared PDD Holdings, the parent company of Temu, had structured the company to avoid paying tax.

“What this document [annual report] indicates is that given how the company is set up through the British Virgin Islands, the Cayman Islands and now Ireland it very much has the set up to avoid paying taxes,” he said.

“I would assume its number one competition is Amazon… and Amazon’s tax practices are really not that much different.”

Mr Ward said the Temu business was young and would be unlikely earning profits that would attract taxation in Australia.

An Amazon spokeswoman said revenue from retail sales made on Amazon.com.au were included in the calculation of the taxable income in Australia for subsidiary Amazon Commercial Services.

Shadow Treasurer Angus Taylor said every company had to pay the right amount of tax, which was why the former Coalition government had doubled penalties for multinational tax avoidance.

“At the election, Labor promised to only raise taxes on multinationals but their current multinational tax bill is so badly designed, small businesses will be affected, while the banks and property sector say it’ll increase the cost of mortgages and housing,” he said.

The Federal Government has recently finished consulting with industry over proposed reform laws aimed at cracking down on multinational tax evasion, including the establishment of a public country-by-country reporting regime.

“The Albanese Government is playing a leading role in establishing a fairer domestic and international tax system. Introducing a global minimum tax rate and a domestic minimum tax rate will help to end the race to the bottom on corporate income tax,” Assistant Treasury Minister Andrew Leigh said.

“An international tax system where big multinationals pay their fair share is better for small businesses, better for consumers, and better for taxpayers.”

Multinationals operating in Australia have been subject to a minimum corporate tax rate of 15 per cent since January, but critics of the new tax rate have said Australia is unlikely to raise much if any in additional taxation revenue while creating a significant compliance burden.

The Australian Taxation Office is prohibited under confidentiality laws from disclosing what a company or individual pays in tax.

An ATO spokesperson said offshore businesses operating in Australia may be required to pay GST, corporate and income tax as well as superannuation obligations to Australian staff.

“There are also special GST rules for Electronic Distribution Platforms,” he said.

“The ATO monitors offshore business activities to identify these situations through a number of ways, including, intelligence sources and community information, financial transaction tracing and close cooperation and information sharing with tax administrations in other countries.

“Compliance action is taken if there are unmet obligations.”

PDD Holdings did not respond to a request for comment. A Temu spokesperson referred The Nightly’s questions on corporate tax to PDD Holding’s corporate filings but said the e-commerce platform was compliant with tax regulations set by the ATO.

“We calculate, collect, and remit the applicable Australian GST on all taxable goods sold on our website and shipped from overseas to consumers in Australia,” said the spokesperson.

“The GST is included in the prices displayed on our platform.”

According to PDD Holdings’ latest financial results, lodged in November 2023, the company recorded an operating profit of $2.3 billion over the quarter.