A taxing time for Rupert Murdoch

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Illustration: michaelmucci.com

There was a chap on ABC Radio in a state of high indignation on Wednesday morning. All this reporting from certain sections of the media on tax was “scurrilous”, he said. The perpetrators needed to “have their head examined”.

As it turned out, it was one Frank Drenth, the executive director of the Corporate Tax Association. We must confess we didn’t even know there was a Corporate Tax Association. Suddenly, we had a real hankering to find out more about this mysterious body that had bobbed up on the airwaves valiantly defending the honour of large corporations and their tax.

Frank was charming on the telephone. We exchanged a few witticisms, talked a bit about boring old tax stuff, and your correspondent vowed not to be too scurrilous should any reporting of the Corporate Tax Association ensue.

Duly upon request, he sent through a copy of the CTA’s own financial statements. He didn’t have to do that. So it was with deep regret the next day that we had to contact Frank to inform him that his financial statements appeared to be, ahem, wrong.

Ironically, the failure to comply with the accounting standards and therefore the Corporations Act is in the notes to the accounts on, would you believe it … tax.

“Prima facie income tax payable on profit before income tax at 30 per cent,” says note 5. Alas, 30 per cent of the CTA’s loss of $98,846 last year would appear to be $29,654, not $27,333.

It’s a small point but perhaps the CTA might restate its accounts. In the meantime it is worth saying that as an “incorporated association” it doesn’t have to pay tax anyway (though it still has to comply with accounting standards). It is a not-for-profit, like a charity.

According to the ATO you can qualify to pay no tax as a non-profit if you are an organisation that “is not operating for the profit or gain of its individual members, whether these gains are direct or indirect”.

Frank assured us that the CTA did not operate for the profit of its individual members even though its role was to represent the interests of its 111 member companies, all of which are billion-dollar enterprises desirous of enhancing profits by paying as little tax as possible.

We should note that, unlike some of its large members, the CTA actually provides “general purpose accounts”, that is, the most useful type of accounts. Its financial disclosure, though a mere mob with four employees, adheres to a higher standard of reporting than the aforementioned large members – and a slew of multinationals that are not members to boot.

War Footing

Frank and the Corporate Tax Association have swung into war-footing in the wake of last week’s announcement of a parliamentary inquiry into corporate tax avoidance.

Straight away the phones of MPs and their advisers were ringing hot with big four accounting firms such as Ernst & Young – “anything we can do to help” – and American tech giants “we comply with the law”.

Among the list of 40 large corporations and multinationals who be asked to appear is Rupert Murdoch’s 21st Century Fox (formerly News Corp). This statement from the Greens, who called the inquiry, has just arrived:

“The Greens will be pushing hard for evidence from Rupert Murdoch and the heads of other international corporations at the upcoming inquiry.

“The Murdoch media empire wields huge influence and appears to pay next to zero tax. Plus News Corp was repaid $880 million after winning a long-running legal battle with the Tax Office relating to a 1989 restructure of the media empire involving billions of dollars and a company in the tax haven Bermuda.

“Mr Murdoch’s claim that his companies don’t dodge tax has raised eyebrows. It beggars belief when we know the reach of his media empire.

“While News Ltd [now News Corp Australia] does everything it can to broadcast the Abbott government’s ‘lifters and leaners’ story to help sell its cruel budget, the Senate committee will expose who the real leaners are, and will provide Rupert Murdoch with an opportunity to show why he should be regarded as a lifter and not a leaner. It will be very hard to argue against the request for Mr Murdoch’s evidence.

“It will be a very bad look for Mr Murdoch to refuse to give evidence.”

No mincing of words there. There will be much mincing of words, however, by the major parties. Although most on both sides of the aisle recognise there is a serious problem here, the pressure will be extreme.

We are talking tens of billions of dollars in Australian earnings being funnelled offshore to avoid the 30 per cent corporate tax rate. Multinationals are the worst offenders. With this kind of coin at stake, the Coalition and Labor can look forward to vibrant party donations in the coming months – as well as the heavy-duty lobbying that has already begun.

The party bribes will rise. The whinging about a witch-hunt will rise and protestations of proper practice will rise.

This is no witch-hunt. If company directors are to be accountable there is no reason why they cannot be publicly accountable.

The trick for the committee of inquiry will be assuring this accountability, assuring that company directors and leaders turn up rather than tax lawyers and second-tier types keenly schooled to bamboozle.

NB: Frank has just called, with good grace, to confirm that, yes, the CTA accounts did err in its tax calculations. There may be words with the auditors.