Minerals Council demands “reform” while its members pay little or no tax

by | Jun 4, 2020 | Finance & Tax

Throughout the COVID-19 crisis, vested interests have been lobbying for “reforms” they’d like governments to deliver under the guise of economic stimulus. The Minerals Council of Australia (MCA) is a case in point. Last week, the MCA published a list of “immediate reform priorities to accelerate economic recovery”. Dan Gocher reports.

Along with its usual wishlist of industrial relation reforms, and incentives for exploration, the MCA CEO Tania Constable declared that “Australia’s company tax rate of 30% is too high and not internationally competitive”.​

This is hardly a new idea from the MCA, of course. This is just the latest manifestation of a campaign the mining lobby rehashes every six or 12 months. Last month, former Senator and current MCA Chair Helen Coonan said, “Australia’s company tax rate is 3% higher than the G20 average and the second highest in the developed world”. Rinse and repeat.

While it’s unsurprising that the MCA is attempting to use the COVID-19 crisis to its members’ advantage, the tax record of its members is worth delving into. The Australasian Centre for Corporate Responsibility (ACCR) collated the company tax paid by all known subsidiaries of the MCA’s ten largest member companies over five years between 2013/14 and 2017/18. While the MCA leadership likes to claim its members are overburdened by tax, the data tells another story.

Of the 33 subsidiaries assessed, the aggregated marginal tax rate was just 18.8% over five years, and just 18.1% in 2017/18. While the MCA claims that the marginal tax rate in Australia, at 28.4%, is higher than the G20 average, MCA members paid a marginal rate 7.4% below​ the G20 average.

The number of subsidiaries paying little or no tax is staggering. Twelve of the 33 subsidiaries assessed paid little or no company tax over five years. Fifteen of them paid little or no tax in 2017/18. The perennial tax avoiders include Glencore, Peabody Energy, Whitehaven Coal and Yancoal.

Eight Glencore companies paid a marginal tax rate of just 11.2% on profits of $5.2 billion over five years. Glencore’s largest subsidiary, Glencore Investment Pty Ltd, paid a marginal tax rate of just 6.2% on revenue of $58.5 billion and profits of $3.8 billion over five years. By comparison, one BHP Group subsidiary, BHP Billiton Ltd, earned three times as much in revenue, $174.8 billion, but paid 57 times more​ in company tax.

While three Peabody companies paid a marginal tax rate of 29.1% on profits of $311 million over five years, its largest subsidiary, Peabody Australia Holdco Pty Ltd, made no profit on revenue of $16.6 billion over five years, and therefore paid no company tax.

Similarly, Whitehaven Coal has not made a profit on $8.4 billion revenue over five years. It hasn’t paid any company tax either.

Mining companies are well known for reducing paper profits through transfer pricing and loading up local subsidiaries with debt, but they can also reduce the tax payable on taxable income through allowances such as asset depreciation, and research and development.

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While BHP Group and Rio Tinto do pay sizable amounts in company tax, the marginal tax rates paid by both companies are starkly different. Both generated similar revenue of $209-210 billion over five years. Rio Tinto was nominally more profitable, but BHP companies paid a much higher marginal tax rate of 23.4%, compared to Rio Tinto’s 15.2%.

The ATO data shows that few if any MCA members pay anywhere close to the nominal company tax rate of 30%. Their social license is built on exaggerated claims and hefty advertising campaigns about their “contribution to society”, while they knowingly minimise their company tax obligations, year in, year out.

Putting aside the methods used to reduce their taxable income, if the nominal tax rate of 30% was applied to all profits from the 33 subsidiaries, it would have generated an additional $19 billion in tax revenue over the last five years. And that’s certainly money Australia could use right now.

This latest campaign by the MCA to reduce the company tax rate would be laughable if it weren’t so damaging. At a time when the federal government is borrowing heavily to fund the economic recovery from the COVID-19 crisis, MCA members are turning their backs on ordinary Australians.

Findings:

  • The aggregated marginal tax rate of the 33 subsidiaries assessed was just 18.8% over five years, and just 18.1% in 2017/18.
  • The marginal tax rate for each group of companies over five years varies from zero to 27.8%.
  • 15 of the 33 subsidiaries assessed paid zero or nearly zero company tax in 2017/18.
  • 12 of the 33 subsidiaries assessed have paid zero or nearly zero company tax over five years.
  • BHP and Rio Tinto generated similar revenue over five years ($209 billion and $210 billion, respectively); while Rio Tinto was nominally more profitable, BHP companies paid a much higher marginal tax rate of 23.4%, compared to Rio Tinto’s 15.2%.
  • Glencore companies paid a marginal tax rate of just 11.2% on profits of $5.2 billion over five years.
  • Peabody companies paid a marginal tax rate of 29.1% on profits of $311 million over five years, but its largest subsidiary, Peabody Australia Holdco Pty Ltd, made no profit on revenue of $16.6 billion over five years, and therefore paid no company tax.
  • Whitehaven Coal Ltd made no profit on $8.4 billion over five years, and therefore paid no company tax;
  • Yancoal companies paid just $54,615 in company tax in five years.
  • If the nominal tax rate of 30% was paid on all profits from the 33 subsidiaries, it would have amounted to an additional $19 billion in tax revenue over five years.

The largest members of the Minerals Council of Australia by membership fee, 2018/19 (Australian Electoral Commission, 2020):

Company Membership fee $
Rio Tinto 3,341,733
Glencore 3,315,600
BHP 3,281,645
Anglo American 1,455,364
Newmont 1,368,988
Peabody 1,352,855
Yancoal 1,337,003
COAL21 1,159,636
Newcrest 1,143,498
Whitehaven 504,239
Thiess 438,161

 

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Who Pays: should ordinary taxpayers foot the bill for bushfires or the fossil fuel giants who pay no tax?

ABOUT THE AUTHOR

Dan Gocher

Dan Gocher

Dan is the Director of Climate and Environment at the Australasian Centre for Corporate Responsibility (ACCR). ACCR engages with listed companies on environmental, social and governance (ESG) issues, and works with institutional investors to improve corporate behaviour. Prior to working in the not-for-profit sector, Dan worked in the asset management industry for 15 years. You can follow Dan on Twitter @justdanfornow.

1 Comment

  1. Avatar

    What is the fee to join MCA based on – % of earnings, what you can afford, best at dodging tax? Anyone Know??

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