Federal govt bypassing AWS Australia for its US entity

Denham Sadler
National Affairs Editor

The federal government is continuing to sign lucrative contracts directly with Amazon Web Services’ US office rather than its Australian entity, despite an update to its whole-of-government agreement switching to the local office earlier this year.

The Digital Transformation Agency has confirmed that the federal government’s agreement with Amazon Web Services (AWS) still allows government departments and agencies to contract with the multinational’s US office rather than its Australian one.

There are a number of current contracts between Commonwealth entities and AWS US, including two which have been signed this year.

The Australian government renewed its agreement with AWS earlier this year, to be worth at least $174.1 million over three years. This was after the initial deal, eventually worth $283.3 million, came to an end after three years.

The first whole-of-government agreement with AWS was with the company’s US office, but the renewed deal earlier this year was switched to the Australian subsidiary.

A spokesperson from the Digital Transformation Agency (DTA) said the agreement provides “flexibility” by not specifying which AWS entity must be dealt with.

“The AWS whole-of-government arrangement is a contracting framework under which the DTA (on behalf of the Commonwealth and Commonwealth agencies) procures cloud computing, professional services, training and certification, and vmWare Cloud on AWS,” the DTA spokesperson told InnovationAus.com.

“The framework provides flexibility for Commonwealth agencies to contract with the AWS entity best placed to provide the services needed by the agencies. Individual agencies are best placed to advise on why they selected the AWS entity with whom they contracted.”

Centre for International Corporate Tax Accountability and Research (CICTAR) principal analyst Jason Ward said that previously most Australia contracts were directly with the US AWS office, but this is more mixed of late.

“Assuming that a contract is signed with the [AWS] Delaware entity, all of the payments for contractors are immediately going offshore and some small part of that goes back to the Australian entity,” Mr Ward said.

“The revenue and profits are taken offshore right off the bat. There’s such an ability for a company like Amazon to make payments and essentially pull money offshore.”

In November last year AWS Australia replaced the US-based office as the reseller of AWS cloud services for all customer accounts based in Australia.

“We are launching AWS Australia so that customers based in Australia can purchase AWS services from a local Australian entity,” AWS said at the time.

“AWS Australia will simplify and support the growing adoption of cloud computing across Australia.”

This year the Department of Agriculture, Water and Environment inked a near-$1 million deal with Amazon Web Services’ Seattle entity for “AWS web hosting services”.

ASIC has also signed a deal worth $162,000 for “professional services for Amazon Connect”, with AWS US rather than its local subsidiary.

A number of other departments and agencies have also signed deals with AWS this year, but with the Australian entity based in Sydney, rather than the US office.

Last week Geoscience Australia revealed a $12.3 million contract running for three years from June with Amazon Web Services Inc, the US entity. This deal was made after a limited tender due to “additional deliverables” needed from the original supplier.

But after receiving questions from InnovationAus.com, a spokesperson for Geoscience Australia said that this was the result of a “system error”, and the contract is actually with AWS Australia.

There have been ongoing concerns around Amazon’s tax practices in Australia.

A recent CICTAR report found that AWS reported $600 million in revenue in Australia but paid only $16 million in tax in the 2020 financial year.

Since 2017-18 AWS’s total income has tripled but the amount of tax that it pays has only increased from $7 million to $16 million, the report found.

Last month more than 20 per cent of Amazon’s shareholders voted in favour of a proposal for the company to provide a country-by-country breakdown of its revenue and tax practices, which would have required it to provide more transparency about the tax it pays in Australia and other countries around the world.

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