Peabody Australia Holdco Pty Ltd
America’s biggest coal company Peabody reported a $1 billion jump in coal sales to $3.3 billion for its Australian offshoot, plus a $1 billion profit in its latest accounts, but still no tax payable. Nor for the four years before that.
This is in line with the rich and long tradition of foreign resources giants skimming on tax, that is skimming profits to their associates overseas to escape paying tax in this country.
Swiss juggernaut Glencore romped in at #1 on the Top 40 Tax Dodgers chart last year but, thanks to some nifty numerical jiggling, managed to slither off the list completely this year, despite only showing tax of $1,000 on $28 billion of income over four years.
Still, Citic Resources at #22, Sumitomo at #30 and Yancoal Australia at #33, ensured foreign traders and producers of coal were extremely well represented again in this year’s Top 40.
Whitehaven Coal narrowing missed the countdown, coming in at #41 with a $6 billion total income and zero tax over four years.
The Tax Office transparency data shows Peabody Australia Holdco with zero tax payable over four years, zero taxable income and $12.3 billion in total income.
It is not just the tough times for coal which assist Peabody in keeping its income tax low, it is also a tricky financial structure. It’s immediate parent company is based in the Netherlands, and the ultimate parent is Peabody Energy in the US.
But a few years ago, Peabody also interposed some other entities in its structure, two Gibraltar subsidiaries which hold and conrtol Australian assets.
One of these Gibraltar subsidiaries is referred to in Peabody’s SEC filings as “a holding company” for the Australian assets.
This disclosure is hard to find in the Australian filings, if it is there, but what you will find is $7.8 billion in related party debts, loans presumably from overseas which enabled Peabody to funnel out $112 million in the year to December 2017. As it was $44 million previously, the debt-loading is on the rise.
The $1 billion jump in coal sales in Peabody’s 2017 financial report lodged with ASIC, its latest, reflects a strong bounce in the price of coal since the ATO data.
For the year to December revenues rose sharply from $2.3 billion to $3.3 billion. As costs were stable at $2.1 billion, gross profit shot up from $249 million to $1.14 billion.
Net profit turned from a $1 billion loss in 2016 to a $1.3 billion profit and, last year, Peabody reported an income tax benefit of $43 million (from a $19.6 million payment in the year prior), further boosted its bottom line.
Peabody did pay $284 million in royalties, according to its latest accounts, up from $174 million, so the states are capturing some revenue.
The accounts also show subsidiaries in the British Virgin Islands, Netherlands and Venezuela.
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We are counting down the Top 40 Tax Dodgers. There are now four years of tax transparency data published by the Tax Office and we have used this data to work out which large companies operating in Australia have paid the least tax, or no tax.
Notable new economy players such as Google, eBay, Booking.com, Expedia are not near the top of the ATO list. That's because they don't (yet) recognise all income earned here; instead, they book Australian revenue directly to their associates offshore. They will be ranked in due course.
For other large corporations, and in particular, multinationals, the main steps in avoiding tax are made by reducing their taxable as much as they can; usually by sending it offshore in interest on loans, "service" fees or other payments to foreign associates. So, we have set a threshold. We have included only those companies which managed to wipe out 99.5 per cent or more of their taxable income over four years.
Qantas, therefore, is not on this list, although it has enormous income and has paid no income tax in Australia for many years. It misses the cut-off due to it not eliminating more than 99.5 per cent of its total income.
The airline had made large losses which were offset against profits. Many large corporations which have paid zero tax in ATO data, have legitimately made losses and have therefore built up "tax-loss shelter".
Further explanation of methodology can be found here.
Many others however, such as ExxonMobil and EnergyAustralia, are on the list as they managed to eliminate all or most of their taxable income by "debt-loading" or other means of aggressive tax avoidance.
In this, the second iteration of michaelwest.com.au corporate tax rankings, we have ranked companies purely on the Tax Office data. We will also publish a list of Australia's better corporate taxpayers, those companies who contribute most to the country in which they operate.
The Tax Office data is not a perfect guide. It does not record refunds, only tax payable and is often at odds with disclosures made for accounting purposes. In some cases, there are multiple entities with the same ultimate offshore parent reporting. One entity may pay zero tax, another may pay at the statutory 30 per cent rate (even if on low taxable income). We endeavour to be fair in our reporting to recognise these issues.
The data also recognises trusts as well as companies. For trusts, it is the members (investors) rather than the trusts who are ordinarily required to pay the tax. In many cases however it is fair to recognise trust structures for what they are, as tax is often the main reason these vehicles have been structured as trusts.
Companies are welcome to debate their rankings or to touch base to clarify or defend their tax practices. We will append or link these submissions.
Hydrox has been taken off the list as it never made a profit.