To the “curtain-raiser” for Australia’s Top 40 tax avoiders. Number three on the list, the bronze medallist in the multinational tax chicanery stakes is unveiled today. We convey this dubious honour, only to be celebrated by its foreign shareholders and its auditor PwC, to the electricity juggernaut, EnergyAustralia. The full “Big Tax List” will be announced on this website in due course, revealing an array household names, ranking this country’s biggest tax avoiders. It is based entirely on the transparency data which was recently released by the Tax Office. There are now three years of data. We have done the numbers, and the results will make you mad.
While the price of gas and electricity have doubled in recent years, stinging every household and business from Broome to Bruny Island, EnergyAustralia has been furiously stacking away billions in income and paying no income tax, not a zack.
According to the latest tax transparency data from the Australian Tax Office, EnergyAustralia racked up 23.9 billion in revenues from 2014 to 2016. Tax expense … wait for it … zero.
While households in their thousands are simply “going off grid”, disconnecting because they cannot afford the exorbitant cost of energy, EnergyAustralia directors and executives have been rollicking in a 50 per cent pay-rise; up from $12.5 million to $17 million last year alone.
While 42,000 Australian families are now wallowing in “energy poverty“, this company – owned by a clandestine entity in the Caribbean – managed to eradicate almost all of its taxable profits, booking just $51.8 million in taxable income over three years on which it paid the glorious total of zero income tax.
While state governments scrambled for political solutions to the crisis, putting taxpayer money on the line to subsidise poor families unable to meet their power bills, EnergyAustralia has been rewarding PwC, its auditors and tax advisors, with $2 million a year in fees.
While the hardest hit – pensioners, indigenous people and low income families – were forking out 12 per cent of their weekly budget keeping the lights on, EnergyAustralia was merrily spending $211 million last year alone on consultants and contractors.
The blanket TV advertising now afoot by this foreign-owned colossus must be costing energy consumers a poultice too, prime-time and swanky as it is. And who pays for this ad blitz? It goes smack-bang on your power bill because, the way the industry regulation works, the more money spent by power companies, the more money they claim from the regulator, the more profits they make, the higher their customers’ bills.
The definitive investigation into Australia’s energy crisis
The immediate parent of the EnergyAustralia Holdings Limited is China Light & Power (Australia) Limited. Lest anyone is fooled by this appellation, this is not “Australia”, as deviously worded; rather it is a company incorporated in the British Virgin lslands, one of the Caribbean’s most secretive tax havens. The latter entity is controlled by a Hong Kong company, CLP Holdings Limited.
Besides retailing electricity and gas, EnergyAustralia generates the stuff too. It owns coal-fired power stations and has a stake alongside Santos in the controversial Pilliga coal seam gas project. The combination though of generation and retailing makes it is one of the country’s cabal of so-called “gentailers”. This vertical integration and market concentration has enabled the “Big Three” of EnergyAustralia, AGL and Origin Energy to charge customers more and make higher profits.
For its part, Origin brought in a gargantuan $37 billion in revenue over the three years, according to the Tax Office data. It booked just $595 million in taxable income on that and recorded tax of $108,004,529 which means its tax rate was 18.14 per cent. But as its profit margin was just 1.62 per cent, its tax “leakage” was a mere 0.3 per cent. Origin’s Big Four auditors and tax advisors will have been proud of this effort, though perhaps not as proud as those of EnergyAustralia which managed to pay zot.
We asked EnergyAustralia if it wouldn’t mind sending the financial statements for its holding company – the company in question, the one which paid zot on $23.9 billion in total income – and they sent the Hong Kong accounts of the ultimate parent, CLP, instead.
This was entirely useless information, barely mentioning its Australian business. The request to provide the useful information was ignored, as were requests to interview chairman Graeme Bradley and chief executive Catherine Tanna.
Nonetheless, the company responded by claiming it was transparent and well behaved. The official response is published below.
According to the financial statements, purchased from ASIC at a price of $38 a pop (the world’s most expensive “public information”), EnergyAustralia made revenue of $6.3 billion last year and a profit before tax of $465 million.
Long term debt was $3 billion, some $426.5 million went out the door in a “repayment of related party payable”, $5.8 billion was wiped out in expenses (notwithstanding some of the highest energy prices in the world). Related party loans bobbed in at $2.8 billion.
Like the notorious oil majors, Shell, Chevron and ExxonMobil, most of this group’s debt comes from itself, flipped from one pocket to the next, and $5.7 million in debt to itself was “impaired … not expected to be recouped”.
This sort of thing would be the envy of EnergyAustralia’s customers – being able to wave goodbye to a cool $5.7 million loan from themselves to themselves. Easy come, easy go.
ATO data dump: naming and shaming the nation’s biggest tax cheats
The methodology for ranking our Top 40 including those companies which were able to wipe out 99.5 per cent of their taxable income, listed by size. Business and tax lobby types claim that, as tax is levied on taxable income rather than total income, it is not a good thing to “name and shame” companies which have large revenue and low tax.
Au contraire, as the list shows – a list based only on the publicly available figures from the Tax Office – most multinationals are adept at eliminating their taxable income as, if you record an income, you are obliged to pay tax on it.
As EnergyAustralia shows, the name of the game is obliterating taxable income. The corporate tax rate is 30 per cent but 30 per cent of zero is still zero.
The Big Tax List will be an organic process. Shortly the Tax Office Top 40 will be revealed.
ENERGY AUSTRALIA RESPONSE
- On Thursday 8 December 2017, the Australian Tax Office published a report containing the total income, taxable income and tax payable for more than 2000 corporate tax entities for the 2015-16 year.
- The report shows EnergyAustralia had total revenue of $7.8 billion and no taxable income in the period under review.
- Our performance reflects how the power generation sector is underpinned by assets that were built last century. Until very recently, demand for centralised generation – from large, older power stations – has declined.
- Historically, an excess of supply in a highly competitive market has led to very modest, and sometimes negative, returns. In recent years that has meant low profitability, and no corporate tax.
- After applying tax losses accumulated in prior years and business costs such as wages, marketing to customers, the expense of running power stations and call centres, EnergyAustralia had no taxable income for the period.
- EnergyAustralia complies with all relevant taxation laws and pays all the tax it is required to. We were the first energy utility in Australia to register for the government’s Voluntary Tax Transparency Code. Our 2017 report is available on our website, here:
- As we’ve noted previously, proceeds from the sale of the Iona gas storage facility, announced in 2015, went towards paying debt and working capital to support expansion of the products and services we offer our customers. A portion of the funds were used to repay loans with CLP Group. With this payment, we have repatriated funds to CLP Group only twice since 2005.
- Corporate tax is just one way in which a business contributes to the community. For example, to the end of October 2017 EnergyAustralia had paid close to $12.5 million in payroll tax.
- EnergyAustralia also contributes to the broader economy as an employer of around 2,500 people in Australia and as a customer for the good and services of hundreds of other businesses around the country. We spend more than $700 million each year on goods and services, more than 97% of which is spent in Australia.
- But most importantly, we provide reliable, affordable energy for our customers while leading the shift to a cleaner energy future for all Australians.
- We hope that our business performance continues to improve, and our contribution to the community in line with it; that would include the corporate tax we pay.