Fleecing Australia: Tax Office data dump shows the usual large culprits paying no tax

Oil and gas majors ExxonMobil, Shell, Chevron, again paid zip in 2017-2018. Serial offender Rupert Murdoch’s News Corp, the money magicians from Brookfield, the “Giant Vampire Squid” Goldman Sachs, a bunch of coal companies and frackers again showed zero income tax payable.

The Tax Office has released its annual data dump of this country’s top corporations and the tax they pay. We now have five years of transparency data and the usual suspects are right up there again, fleecing Australia.

Just under a third of the large corporations on the list of 2,214 paid no tax. Many of these will have had bona fide losses. In Australia, unlike the US, tax losses last forever. Thankfully Qantas’s billions in tax losses finally ran dry during the year and the airline was compelled to report a measly $10.96 million in income tax.

Putting this in perspective, this is far less than Qantas boss Alan Joyce’s pay last year of $24 million and was struck on total income of $16.6 billion and taxable income of just $98 million.

EnergyAustralia finally paid a skerrick of tax. Having belted out $30.2 billion in revenues over the prior four years, the energy giant, which is controlled in the notorious British Virgin Islands, stumped up $68.7 million; not much on its annual $7.7 billion from tapping energy customers, or even its taxable income of $368 million.

Perennial tax dodger Glencore actually paid some tax; $240 million on total income of $15.7 billion. Other coal companies such as Yancoal, Peabody, Whitehaven and Sumitomo paid zip on their respective billion-dollar incomes, and despite a bounce in commodity prices. Lendlease, which pays more tax in other countries than it does in Australia (zero) recorded $9.5 billion revenue for the year, $69 million taxable income and donut tax, again.

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The Tax Gap

Notwithstanding the incredible size and market power of these large tax dodgers, particularly the oil and gas majors, the Tax Office is claiming the “Tax Gap” stands at a mere $2 billion.

“The tax gap is the difference between the tax payable according to law and the tax actually collected from taxpayers. The vast majority of tax due is paid voluntarily and audit activity collects some of the remainder. What is left uncollected is known as the net tax gap.”

This would appear to be the most politicised aspect of the Transparency Report. It is in the Government’s interests to claim that it has beaten the multinational tax dodging epidemic. Indeed it has claimed precisely this in TV advertisements. Further, many of these companies are large political donors for both the Liberal and Labor parties.

Highlights and Lowlights

• Foreign multinationals are again the worst taxpayers. The predatory IKEA for example paid just $5.7 million versus local furniture group Nick Scali which paid $17.9 million.
• Trust structures (tax payable by members) such as tollroad operator Transurban, Sydney Airport, Stockland and Mirvac paid zero collectively. They represent major leakage as most of their members or shareholders pay tax at half the corporate tax rate.
• Accommodation duopoly Booking.com and Expedia still book most of their revenue straight offshore. While Google, Facebook, Apple and Amazon have started to pay a bit, their contribution vis-a-vis their profit growth and enormous profit margins remains paltry.
• The big four banks, Wesfarmers, Telstra, Optus, Rio and BHP pay around half the total tax-take. In general, ASX listed companies pay multiples of their foreign and unlisted rivals.
• The “offshoring” of Australian assets continues to erode the tax base. Brookfield, which recently acquired Aveo’s aged care empire and Healthscope’s 43 hospitals, paid zero tax via its secretive BPIH ($1.4 billion total income) and now these assets are controlled in Bermuda and the Cayman Islands respectively.
• This leakage will persist. Bellamy’s, whose takeover by Chinese interests was approved recently, paid $18.7 million tax. Don’t expect that contribution to continue.
• Of the Big Four audit firms which audit and provide tax avoidance advice to multinationals, all are partnerships and none disclose profits or tax. Only a company associated with PwC shows a fraction of tax payable.
• Gas cartel member and oil major Exxon is definitely one of the worst dodgers, having now paid zero tax over five years on $42.3 billion in revenue
• The PRRT (Petroleum Rent Resource Tax), which is supposed to capture some value from this extraordinary cashflow, is an out-and-out dud.

“There are nine corporate entities in the 2017–18 PRRT transparency population, with total PRRT payable of $1.16 billion. The number of entities paying PRRT decreased from 14 in the previous year and PRRT payable increased from $946 million.”

The narrative was underwhelming, with the Tax Office saying PRRT revenues were “also affected by key design features of the PRRT.

“PRRT will only arise when a project has recovered all eligible outlays associated with the project (after deducting eligible exploration expenditure transferred from other projects), including the achievement of a threshold rate of return on the outlays. This means projects tend to pay no PRRT for some years even after production has commenced.

The Billionaires

Although Packer, Lowy and Murdoch family interests are not captured by the data, some of the rising wealth of more recent billionaires is captured.

Gina Rinehart’s Hancock Prospecting showed tax payable of $352 million, Andrew Forrest’s Fortescue paid $392 million and Clive Palmer’s Mineralogy paid $45 million. The Vidor family’s Toga Group and the Pratt family’s Pratt Consolidated (income $2.8 billion) again paid nothing.

Gap in the Tax Gap

At michaelwest.com.au, we believe the real tax gap is probably between $20 billion and $40 billion, depending on how you calculate it.

“In 2016–17, large corporate groups reported approximately $47 billion in corporate income tax. The net tax gap is estimated at $2.0 billion, or 4.0% for this fiscal year,” claims the Tax Office.

“Our large corporate groups tax gap is similar to jurisdictions such as the United Kingdom (UK). The UK’s large business tax gap has been estimated at around 5% from 2012–13 to 2017–18.”

Despite this political dissembling, there were some very useful messages in the narrative which accompanied the spreadsheets. The Tax Office called for greater transparency. Transparency and rising community awareness of corporate tax avoidance and some modest reforms have brought billions into the ATO coffers since the Senate Inquiry into Corporate Tax Avoidance of 2015.

Further, the ATO appears to be making veiled suggestions that many large corporate groups are gaming its disclosure regime by restructuring to avoid detection.

“Many large corporate groups consist of smaller income tax reporting entities whose aggregated total income meets the transparency population income thresholds. If these entities are not consolidated for tax purposes, some or all of the entities may not individually meet the income threshold for inclusion in the report.”

For those wishing to see the track record of previous years, please visit our Top 40 Tax Dodgers. We will roll out the next Top 40, along with the Top 40 Best Taxpayers over the coming weeks.

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