The first thing to note about today’s data dump from the Australian Taxation Office is the agility and innovation of Australia’s wealthiest private companies when it comes to paying tax. Or not.
They managed to pay $2 billion net tax on total income of $145 billion in 2013-2014 – what might be reasonably characterised as a skerrick.
What a time to be alive.
It should be said that just one year of data, and mere headline data at that, is not much to go on.
Dick Smith Holdings, for example, might be forgiven for not stumping up much tax as (a) it was only emerging from the care of private equity (never the taxman’s best friend) in 2014 and (b) it was well on its way to hitting the wall.
It should also be said that tax is paid not on total income (revenue) but on taxable income (pre-tax profit).
For the companies on the ATO’s list, taxable income was $5 billion (net and $8 billion gross) during the year.
The trick of course is to get one’s taxable income down as much as possible before one has to pay tax on it.
This is where Australia’s largest private companies – like their multinational counterparts – excel.
The other notable figure in the Tax Office presentation is the 11,000-odd entities associated with those 321 private companies.
That’s a lot of associates.
Many of them are super funds, family trusts, joint ventures and partnerships, entities which are mostly not captured in the data released by the ATO.
With so many associated entities, viewing the core company data alone is akin to gazing at the Mona Lisa but only being able to see her left earlobe.
Nonetheless, what we have is better than nothing, providing some critical transparency and making an important step in combating tax avoidance.
If there was full transparency, there would be very little tax avoidance at all. Aggressive avoiders and their lawyers and accountants thrive in the darkness of non-disclosure.
Without delving into each entity over a reasonable timeframe, let alone properly examining the affairs of their myriad associates, it is hard to work out who Australia’s stingiest billionaires are.
You can see Harry Triguboff’s Meriton Properties tipped in $76 million in tax on taxable income of $262 million and total income of $1.2 billion – a commendable effort, albeit one made in a construction boom.
You can see Gina Rinehart’s Hancock Prospecting was the biggest taxpayer on the list, with $466 million paid. You can see trucking magnate Lindsay Fox’s Linfox paid $33 million, the Myer family’s investment vehicle forked out $12 million and Thorney, the investment vehicle for former packaging king Dick Pratt, paid zero on taxable income of $36 million and total income of $430 million.
You can see entities associated with Seven Network billionaire Kerry Stokes paid a fair whack.
But without detailed searches the interests of other well-known billionaires like the Packers, Murdoch and Lowys cannot easily be seen (apart from James Packer’s sharemarket-listed Crown casino business).
Indeed there are plenty of other unknowns.
For example, we don’t know what tax losses were available to each entity that year, what the trading conditions were like, whether capital was sunk into hungry new ventures and so forth – all mitigating factors when it comes to tax paid.
But the list is a good start and governments would do well to ignore the lobbying and further increase transparency in the future.
Modest as they were, last year’s reforms helped put the country on the right track.
Now anybody can access this tax data – as well as the large foreign and local corporation data – and see whether those who can most afford to pay tax are paying it, or at least proud enough to reveal their contributions.
There’s plenty to see.
German giant Hochtief paid zero tax despite $137 million in taxable income. The ATO’s data also reveals that Babcock & Brown International is still alive and no tax paid, despite a $681 million income.
The time-honoured cheapskates of Wall Street, Goldman Sachs and JP Morgan, managed to pay no tax despite respective incomes booked at $632 million and $1 billion.
It’s all very interesting, but what’s the next step?
The Tax Office ought to grade these big corporate players into good taxpayers and bad.
Over time, a picture is then likely to emerge about who the good corporate citizens are. One year’s data is insufficient to make definitive judgments.
During the same timeframe as the new Tax Office disclosures for private companies (2013-2014), some 63 per cent of ASX-listed companies reported a loss.
In its submission to the Senate’s corporate tax inquiry last year, the Uniting Church presented FOI documents noting that of the 2168 entities identified by the Tax Office as reporting more than $100 million in total annual income, and therefore affected by the disclosure laws, 30 per cent did not pay tax in 2012. Today’s list encompassed entities over $200 million in revenue.
So there appears to have been some “restructuring” by some of the private companies to push their disclosures beneath that $200 million threshold.
Tax Commissioner Chris Jordan told the press conference, “We haven’t seen large scale restructuring”, which suggests some of the more agile operators may have split their businesses to get under the disclosure threshold. Perhaps only a handful had time.
Another factor in the disclosures was that only 200 of the 321 entities consolidated for tax.
That would normally make things more difficult for the ATO to sift through. That said, unlike in the old days, authorities now have sophisticated data analysis capabilities which can more comfortably evaluate data from 11,000 entities. So while tax advisers toil tirelessly, and at enormous expense, to help their large clients skive out of paying tax, the Tax Office has technology on its side.
Speaking of advisers, if the ATO was really serious about getting more tax out of private companies, one initiative might be to stop tax deductions for tax advice.
At the moment, ordinary PAYG tax-paying citizens are effectively subsidising the efforts of the super rich – and indeed the efforts of their richly remunerated advisers – to get their tax bills down.
Meanwhile, the largest institutions in the world remain well outside the disclosure net.
Ironically, the big four global audit firms – PwC, E&Y, KPMG and Deloitte – don’t have to publish accounts.
Yet they advise multinationals on minimising tax while simultaneously advising governments on tax policy.