Exempt: how Defence dodges the taxman

by | Aug 15, 2018 | Government

Foreign military contractors have been awarded a staggering $73 billion in contracts, apparently tax-free, because successive governments have struck contracts directly with offshore companies, even as far afield as the Atlantic tax haven of Bermuda.

Sorting information about government contracts from the Austender database, data warehousing expert Greg Bean has identified $73 billion in contracts with “ABN Exempt” entities overseas since 2004. Mr Bean said he was “shocked” by the magnitude of the numbers.

Although the foreign defence giants which sell military hardware and services in Australia – the likes of Boeing, BAE Systems, Thales and Lockheed Martin – have companies which are active and registered here in Australia, that is companies with ABNs (Australian Business Numbers), billions in defence contracts have been struck directly with their foreign associates.

As foreign companies have no obligation to pay tax in Australia, it would seem the profits made from this $73 billion in military sales, profits which would normally be subject to tax at the statutory 30 per cent corporate tax rate, escape Australia’s tax system. It would appear therefore that the Australian public is being shortchanged to the tune of billions of dollars.

Already, the world’s largest defence companies have a poor record of paying tax here, despite the enormous amounts spent by government on defence procurement.

Defence giants: the “Valley of Death” is really a Mountain of Money

A good deal of this $73 billion identified by Greg Bean has also been struck with companies who list foreign business numbers.

Department of Industry, which oversees the Austender data-base was asked to comment and referred the approach to the Department of Defence. Defence’s response will be appended to this story when it comes.

Last year, $12.1 billion in contracts were awarded to companies which were ABN exempt and $14 billion went to companies with foreign business numbers.

Contract note. Source: Austender

So far in 2018 the trend has reversed with $16 billion going to ABN companies and $4.7 billion to companies whose contract notes “Taking it a step further,” said Mr Bean, who did the data analysis for michaelwest.com.au, “If we look at the supplier countries, in 2017, $190 million went to ABN exempt entities in France, $32 million went to Italy, $29 million to Norway, $340 million to Spain and $11.5 billion to the US”.

Exempt contracts. Source: Greg Bean and Austender

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Michael West

Michael West

Michael West established michaelwest.com.au to focus on journalism of high public interest, particularly the rising power of corporations over democracy. Formerly a journalist and editor at Fairfax newspapers and a columnist at News Corp, West was appointed Adjunct Associate Professor at the University of Sydney’s School of Social and Political Sciences. You can follow Michael on Twitter @MichaelWestBiz.

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