Australian Prime Minister Scott Morrison hit back at the search giant saying "we don't respond to threats" after Google said it would remove its services from the country.
Google has threatened to make its search engine unavailable in Australia if the government there goes ahead with plans to make the company pay for news content.
Australian Prime Minister Scott Morrison quickly hit back, saying "we don't respond to threats".
Morrison's comments came after Mel Silva, the managing director of Google Australia and New Zealand, told a Senate inquiry into the bill that the new rules would be unworkable.
The mandatory code of conduct proposed by the government aims to make Google and Facebook pay Australian media companies fairly for using news content they siphon from news sites.
Silva said it was willing to pay a wide and diverse group of news publishers for the value they added, but not under the rules as proposed, which included payments for links and snippets.
"If this version of the code were to become law, it would give us no real choice but to stop making Google Search available in Australia," she said.
She said the code posed unmanageable financial and operational risks for Google and suggested a series of tweaks to the bill.
Like in many other countries, Google dominates internet searches in Australia. Silva told senators about 95 per cent of searches in the nation are done through Google.
Asked by one senator how much tax it pays, Silva said last year it paid about 59 million Australian dollars (€37.5 million) on revenues of AU$4.8 billion (€2.35 billion).
Facebook also opposes the rules and has threatened to remove news stories from its site in Australia.
Simon Milner, a Facebook vice president, said the sheer volume of deals it would have to strike would be unworkable.
The Australian government has described Google as an indispensable utility but noted it faces very little market competition.
The move to seek a further financial dividend from Google's activities is seen as a bid to bolster Australia's embattled news media which has seen a crippling decline in advertising revenue.