Amcor switched head office from Australia to Switzerland three years ago, a move which is emblematic of the group’s approach to paying tax.
The packaging giant recorded $11.7 billion in total income over the four years of available Tax Office transparency data. It managed to eliminate most of that in costs, which left just $35 million in taxable income on which no tax was paid – a tax rate of zero.
It seems everybody shares in the riches of Amcor except the Australian Tax Office. Shareholders bank roughly half a billion a year in dividends, chief executive Ron Delia takes home $12.2 million pay, the conflicted auditor PwC picks up a cool $8 million a year for audit and tax advice, even foreign tax authorities do quite nicely. But the poor old ATO … zip.
Amcor has shot from #23 last year to #8 on the Top 40. Like Amazon, Amcor is ever on the acquisition trail and if a company makes endless acquisitions it has ample scope to reduce its tax exposure by constant restructuring charges and acquisition costs.
It has integrated 26 acquisitions in the past six years and has 250 plants in 4f0 countries. Hence, the lack of visibility on tax.
When you look at the ATO numbers there is no tax payable. When you look at Amcor’s financial statements though you will find it pays quite a bit of income tax. The problem is that the ATO is not getting it.
There is no breakdown in the accounts of where the tax goes. In 2015 and 2016, its tax disclosures show Amcor paid $188 million and $135 million respectively. In the two years since the ATO data (which lags two years), Amcor has recorded $150 million and $160 million in tax paid.
There is no explanation given and Amcor does not appear to have been bothered to produce a Tax Transparency Report. We did ask. No response.
Presumably then, the $150 million a year in tax paid by Amcor is paid to foreign revenue authorities, not to the ATO.
Most multinationals however tend to pay more tax in their home countries than elsewhere. Not Amcor. Lendlease is another case in point.
The company notes in its accounts that “the effective tax rate for the year was 17.5 per cent”. It also discloses that it is being pursued in the courts by tax authorities in Brazil.
Chairman Graeme Liebelt kicks off the latest annual report with these words: “After several strong years, fiscal 2018 was a trying one for our industry”.
The ATO might well say “after several extremely weak years it appears that fiscal 2018 will be another trying year” because Amcor still has another $820 million in unused tax losses and appears to deem the paying of income tax in Australia as a matter of discretion, rather than necessity.
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We are counting down the Top 40 Tax Dodgers. There are now four years of tax transparency data published by the Tax Office and we have used this data to work out which large companies operating in Australia have paid the least tax, or no tax.
Notable new economy players such as Google, eBay, Booking.com, Expedia are not near the top of the ATO list. That’s because they don’t (yet) recognise all income earned here; instead, they book Australian revenue directly to their associates offshore. They will be ranked in due course.
For other large corporations, and in particular, multinationals, the main steps in avoiding tax are made by reducing their taxable as much as they can; usually by sending it offshore in interest on loans, “service” fees or other payments to foreign associates. So, we have set a threshold. We have included only those companies which managed to wipe out 99.5 per cent or more of their taxable income over four years.
Qantas, therefore, is not on this list, although it has enormous income and has paid no income tax in Australia for many years. It misses the cut-off due to it not eliminating more than 99.5 per cent of its total income.
The airline had made large losses which were offset against profits. Many large corporations which have paid zero tax in ATO data, have legitimately made losses and have therefore built up “tax-loss shelter”.
Further explanation of methodology can be found here.
Many others however, such as ExxonMobil and EnergyAustralia, are on the list as they managed to eliminate all or most of their taxable income by “debt-loading” or other means of aggressive tax avoidance.
In this, the second iteration of michaelwest.com.au corporate tax rankings, we have ranked companies purely on the Tax Office data. We will also publish a list of Australia’s better corporate taxpayers, those companies who contribute most to the country in which they operate.
The Tax Office data is not a perfect guide. It does not record refunds, only tax payable and is often at odds with disclosures made for accounting purposes. In some cases, there are multiple entities with the same ultimate offshore parent reporting. One entity may pay zero tax, another may pay at the statutory 30 per cent rate (even if on low taxable income). We endeavour to be fair in our reporting to recognise these issues.
The data also recognises trusts as well as companies. For trusts, it is the members (investors) rather than the trusts who are ordinarily required to pay the tax. In many cases however it is fair to recognise trust structures for what they are, as tax is often the main reason these vehicles have been structured as trusts.
Companies are welcome to debate their rankings or to touch base to clarify or defend their tax practices. We will append or link these submissions.
Hydrox has been taken off the list as it never made a profit.
Using both the ASIC and Australian Electoral Commission (AEC) databases we have conducted more than 5,000 searches and counting.
Through the ASIC searches we have been able to collate the necessary information for every company on the grandfathered list, ranging from company directors, shareholders (both persons and organisations), a company’s auditor and much more. This has all been incorporated into our database, which is designed to map out these Dark Companies and tackle our driving question.
We also used the AEC database to generate an extensive list of political donations from these Dark Companies that date from the 1998-99 financial year to the present. We have designed a separate database for these figures, listing political donations from the entity itself, its directors and/or its shareholders. Each donation has been separated into recipient categories to better display the amounts funnelled to the Liberal and Labor parties and their constituencies.
The donations help indicate why the exemption, which ensures such a lack of transparency, has stood the test of time despite numerous attempts over the years from both sides of Parliament, the cross bench, the Greens, Treasury, corporate regulator ASIC and a joint parliamentary inquiry, which have all called for the exemption to be abolished. Both databases created by Michael West Media complement each other to bolster the narrative of the stories that follow.
In a similar approach to our Q.E.D. and Revolving Doors series, we will be releasing a profile each day that highlights directors of these Dark Companies, many of whom appear on the 2020 Australian Financial Review Rich List.
The ‘Secret Rich List’ project will provide considerable evidence to shore up the next attempt to repeal the grandfathering exemption, which Independent Senator Rex Patrick is scheduled to move before the Senate in early 2021.