Tax avoidance rife among Australia’s largest companies

By Leith van Onselen

Amid all the hoopla over company tax cuts, it’s easy to forget that hundreds of companies across Australia haven’t paid corporate taxes in the last decade. From The ABC:

Qantas CEO Alan Joyce, one of the most prominent supporters of the Turnbull Government’s proposed big business tax cut, presides over a company that hasn’t paid corporate tax for close to 10 years…

Despite generating income of $106.4 billion, the flying kangaroo has avoided paying tax on that bounty since 2009, thanks to Australia’s generous tax concessions, depreciation provisions and the ability to offset company losses against past and future profits.

New analysis by the ABC reveals Qantas is not alone — its tax behaviour is consistent with about 380 of Australia’s largest companies. ATO corporate tax transparency data — confirmed in email exchanges with company representatives — reveals about one in five of the country’s biggest companies have paid no tax for at least the past three years…

Not one of Australia’s biggest airlines has paid corporate tax since at least 2013, including Virgin and its subsidiary Tigerair, Etihad, Emirates and Qatar…

At a time when Australian households have seen their electricity prices soar, the country’s leading energy retailer, EnergyAustralia hasn’t been paying corporate tax. EnergyAustralia paid no corporate tax for the decade to 2016…

Ten years after the global financial crisis — which they are largely responsible for creating — some of the world’s most prominent investment banks are collecting tidy sums of income in Australia and not paying corporate tax.

Among them is Malcolm Turnbull’s old employer, Goldman Sachs… Ditto for JPMorgan Chase which raked in $2.2 billion and hasn’t paid corporate tax since at least 2013…

Australian tax law has allowed foreign companies to shift profits to affiliates or parent groups offshore in the guise of payments for services.

They’ve also been entitled to lend money to their Australian operations at inflated prices to create excessive tax deductions in Australia.

This can all work to render the Australian business loss-making, therefore not required to pay corporate tax…

For local companies, the dividend imputation system is a unique tool that allows businesses to pass tax credits on to their investors.

Australia and New Zealand are now the only two OECD countries to offer imputation which results in around a third of corporate tax revenue in Australia being handed back to investors…

Over the past 30 years, a number of countries have abandoned dividend imputation, including the UK, Germany, Finland, Norway, Singapore and Malaysia…

Rupert Murdoch’s News Corp, which hasn’t paid corporate tax in Australia for at least four years… Foxtel had also not paid corporate tax…

Software giant Atlassian also pointed to R&D tax concessions when explaining why it too hasn’t paid corporate tax for the past two years on accumulated income just shy of $1 billion…

The big property and construction companies Lend Lease, Grocon, Stockland and GPT are also part of the corporate tax-free club…

The large scale tax avoidance helps to explain why Australia’s average and effective corporate tax rate is actually very low:

It also renders bunk the incessant calls for Australia to lower company taxes on tax competitiveness grounds.

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Comments

  1. Looks to me as though all tax systems operated in this country are legal, otherwise they would have been checked
    the issue is companies have a choice, to set up here or to not
    It is all about employment.
    as tis automation rolls out into the services sector there will be heaps of punters without a job.
    No job the joint stops, rapidly

    • Where have you been, WW? The ATO has already taken back 5b that was avoided by the likes of Chevron etc. So, no, not necessarily legal by a long shot. The issue is a lack of auditing.

    • I am hard pressed to see how you can have, year after year billion(s) in revenue and zero tax. If necessary the government should change the law to make ambiguous loop holes clearer so companies pay fairly for access to our market.

      Michael West analysed a bunch of ATO data and found that about 130 of our larger companies have paid zero tax in the last 3 consecutive years on revenues of 930 billion. Chasing welfare cheats to recover revenue would have to be a round error on what can be retrieved from these thieves.

  2. What did the article mean when it said ..”Australia’s generous tax concessions…….and the ability to offset company losses against past and future profits”. Can businesses carry back losses against past taxable profits in Australia?

    • Don’t expect the ABC to understand business accounting! It hangs on the teat of the taxpayer knocking business and the big end of town, devoting prime time shows to uncovering some minor corporate misdemeanour and now channels its inner Micheal West.

      The anti business/corporate spirit in Australia is alive and well.

      • 3d that is disingenious even for you.
        The Business & Corporations aversion to paying tax is what fuels the anti business sentiment.
        But you already know that.

    • Actually Swan did bring a loss carry back scheme for small business which was widely seen as a good thing for the sector. However, the party of the small business, led by Abbott at the time, scrapped in in a fit of “if the ALP did it it must be bad” lunacy because it was linked to the carbon tax.

    • Offshoring is the biggest avoidance technique. Xstrata pays hardly any tax, or many other examples …eg Apple….

  3. Can anyone tell me why a 1% revenue tax, deductible from other tax payable (ie never higher than tax rate, but never lower than 1% of revenue) is a bad idea?

    I figure it’ll kill a crapload of tax strategies and even force useless companies like Chevron to pay tax.
    I figure it’ll be net zero effect to most normal companies but really target the dodgers.
    We might even end up in a position where, after a few years for things to find their new footing, there’s no need for a company tax rate or even GST. Just a small % of revenue.

    • I agree. Put a 30% tax on digital downloads. A massive tax on tap water, land, and LNG. Put a tax on immigration too. Charge $250k for each PR visa.

  4. Jesus I hate idiotic articles like this.

    Corporate tax based loosely based on profit, not revenue – a concept that seems perpetually to be beyond the understanding of the MSM.

    The cash economy and overclaimed work related expenses are a far bigger tax hole than corporate tax avoidance.

    • Agree in both respects. The second has been nominated by the ATO as the largest area of avoidance exceeding corporate avoidance by considerable amount.

    • Also, this comment is hilarious:

      “The big property and construction companies Lend Lease, Grocon, Stockland and GPT are also part of the corporate tax-free club…”

      GPT and Stockland are stapled groups which predominantly earn their income through property trust – trusts don’t pay tax but instead pass through all assessable income in full to investors.

    • Corporate tax based loosely based on profit, not revenue – a concept that seems perpetually to be beyond the understanding of the MSM.”

      Of course they understand it. They also understand that corporations ‘engineer’ losses or very small profits via account tricks (buying their goods at high costs from a subsidiary in tax havens).

      • If they are overpaying they will get caught. All these “tricks” are more myth than reality. The real losers from the tax structures used by Apple etc are the home countries like the US where Apple parked profits in Ireland etc for years without paying US tax. Trump mostly capitulated on this with his recent tax package, this gifting Apple shareholders tens of billions of dollars.

      • Except that the EU prosecuted Apple for underpaying Irish tax by E13BN, so they cheated the Irish taxpayer as well as the US taxpayer.

        The fact that the Irish govt was happy to overlook this for the sake of keeping Apple jobs is a different issue. If all countries bend over to big companies then they’ll keep grasping for more and more and all just end up domiciled in the places that offer the best combination of low taxes and whatever else they want.

        This is a fundamental issue of the balance of power between the State and the Market and the State needs to fight back. I’d tell them, pay your tax or we’ll call your bluff and you can f off to Singapore or wherever. See how your brands fare in Aus after you close shop and sack everyone.

        Personally I’m in favour of offering tax breaks to companies for job creating activities, but not competing in a race to the bottom for the lowest tax rate, or letting them screw the taxpayer by dodging the tax they should pay.

      • Apple don’t pay tax anywhere. Taxing these companies on profit and not turnover is stupid. The ATO is full of idiots. The current system is broken. It should have been fixed years ago.

      • ” The ATO is full of idiots. The current system is broken. It should have been fixed years ago.”

        The ATO don’t make the rules. And turnover tax is basically a GST.

    • The problem is, its too easy for corporates to shuffle cash around and pretend they don’t make a profit somewhere.

      For example, from the ABD article – “Goldman generated revenue of $1.84 billion over three years but paid zero corporate tax”

      Are we seriously to believe that GS has set up in Aus with a business model that will deliver nearly 2Bn revenue but zero profit over three years? They’re a fucking investment bank. Utter nonsense. They’ve just shifted the cash. Companies like Apple are also egregious thieves. Millions of iphones sold in Aus with very skinny overheads and apparently they can’t make any profit. Bunch of dumbasses clearly.

      Its time to close these loopholes

      • There’s a very large army of tax consultants and lawyers who would suggest otherwise.

        Just from my own experience, I used to work for a very large multinational who structured their affairs in quite a strange way so they could book their profits in the most advantageous place whilst looking as though they made zero profit in lots of other places. This behaviour is the norm for international companies, I’m staggered anyone would deny this.

      • The whole ABC article is about how some companies who earn large gross revenue aren’t paying a lot of tax. So they are hardly hiding the income are they. And there are very robust rules about the pricing of goods and services acquired from related parties.

    • And because it is assessed on profit, schemes like double Irish and artificial interest payments to subsidiaries have thrived. When profit is manipulated there ought be a deemed profit as a percentage of turnover.

  5. One of big casualty of profit shifting along with 457’s is no local investment in workforce skilling, causing a hollowing out of Australia’s multi-factor productivity.

    Ironically the more “investment dollars” the multinationals deduct as expenses, the less investment they actually make.

  6. would help enormously if the journalists understood tax effect accounting in companies, specifically permanent and timing differences, and also the imputation system, and different types of legal structures such as companies 30%, partnerships and trusts are flow through, etc). a lot of mystery would then go away and a lot of their silly comments. TEA is such a pure mathematical system that it unravels a lot of the mysteries in the Tax Act because you can see the maths / algebra within

    one thing that is open to a lot of substantial abuse is cross border structuring ie transfer pricing especially around intellectual pricing and interest rates, thin cap, hybrids, etc. which has much potential for exploitation from what I have ascertained. Jordan and mills in ato and other tax partners also in ato know this but think they like cutting deals rather than going head to head with corporates from what I understand, perhaps to save face in case they lose. anyway in relation to transfer pricing, what the hell is a fair market price, whenever I delve into valuations I see all types of potential for abuse

    • ” but think they like cutting deals rather than going head to head with corporates from what I understand,”

      This is changing. On TP, Chevron is a game changer. On hubs they are taking on BHP and Rio but that will probably take a few years to get through the courts and on hybrids there are a bunch of law changes that will help.

  7. Praise be my children, let us give thanks to the new classical lord that these tax cuts are merely ideological and not a ‘Cohn’ Job from the Goldman Sachs playbook.
    http://capitalinstitute.org/blog/gary-cohn-tax-plan-reform-trump/

    Let not the followers lose faith in the high priests and find commodification in new religions. For thine is the kingdom, the bonuses, remuneration and tax shelters the glory, for ever and ever.
    Amen.

  8. “Tax avoidance rife among Australia’s largest companies”

    …. and in other news: bears sh!t in the woods, the Pope has a Catholic bias etc etc …. ad infinitum.

    One of the most profitable areas at accounting firms and investment banks is actually the depts dedicated to ‘tax solutions’. Go figure.

  9. The ATO runs around scrounging for dollars here and there and they couldn’t care less a few years back !!
    The ATO runs around scrounging for more money but do I hear the need to reduce taxes – particularly the fixed cost taxes like vehicle registration, water rates etc, etc.
    Governments see themselves as needing to employ people – particularly themselves !! There aint a government around that willingly downsizes to run skeleton staffed. Almost every Government employee is sucking on the teat. Virtually all of them would not survive if it weren’t for good old Aunty.

    Pitchforks needed.

    • Be mindful who you prod with your pitchfork @swmcl

      The revolving door of government/ quasi govt/ corporate makes it hard to distinguish a target that’s not on the public teat. Whilst the cognitive reasoning to think one is a good, the other a bad is a feature of the meta-narrative, not a bug.