Drumroll … trumpets, red carpet: we are rolling out Australia’s Top 40 Tax Dodgers for 2021. Michael West unveils the villains and the heroes of the tax scene, including new gongs this year for Lifetime Achievement Award and UnAustralian of the Year.
“Everyone has to play by the rules in this country,” declared Prime Minister Scott Morrison in his latest “land of the fair go” homily.
But which rules? That is the question. A select band of billionaires has their own set of rules, rules not available to ordinary Australians, rules which the Government has entrenched.
Then there are the tax rules: one simple set of rules for ordinary Australians yet a maze of complicated loophole-ridden rules for the wealthy and for large corporations.
If you earn $56,000 a year as a PAYG taxpayer, you can expect to pay 15.2% tax on that income. Yet, US oil major Exxon has sold a staggering $56 billion worth of oil and gas – drilled from seabeds around Australia – and paid not one red cent in tax on that income in six years.
Exxon has topped the Michael West Media Top 40 Tax Dodgers charts for the third year in a row.
How do they do it? We will get to the mechanics of Exxon’s devious tax practices shortly. Suffice to say they have written themselves $14bn in loans and the interest on those loans flows overseas. They sell our oil and gas mostly to their associates overseas too, at low prices.
The average Australian can’t set up hundreds of foreign companies to sell things to themselves. They can’t write themselves big fat loans and pocket the interest, or “service agreements” or royalties for that matter. They only have one rule, pay tax at the designated rate. No loopholes, no taxing “profits”, however they may be calculated.
This year’s gongs
The Top 40 chart for 2021 (above is calculated using the same methodology we have used for five years. So it is that many egregious tax dodgers slip through the net. Drawing on all the Tax Office Transparency data available therefore, as well as filings to the corporate regulator, we are announcing a new suite of gongs this year.
- Lifetime Achievement Award: Rupert Murdoch’s News Australia Holdings racked up $16bn income but paid zero tax over six years even on the $246m they declared in taxable income.
- UnAustralian of the Year: Lendlease, which racked up a gargantuan $53bn in total income and $443m in taxable income but still managed, despite all that taxable income to pay zero tax.
- Most Improved Player: Victoria Power Networks bolted from 33rd to 24th on the charts this year with its $9bn income, zero tax again; not to mention its tax haven connections, control by a Hong Kong billionaire, a history of Tax Office probes, a devious corporate structure, huge loans to itself, and a conflicted Big Four auditor. VicPower operates the CitiPower and Powercor electricity networks.
- Rookie of the Year: NBN Co has made the chart this year! With its $6.7bn income and no tax, it’s no surprise there’s no profit, given Australia ranks behind Kenya in internet speeds.
- Best Director: PwC takes out this inaugural gong for its continued services to paper shuffling and engineering massive global tax scams while pulling hundreds of millions in consulting contracts from governments and paying no tax itself. A spectacular performance.
- Quiet Achiever: Vennor Investments with its $10.6bn income and zero tax over 6 years, nobody had ever heard of them, and that’s the way they like it, until we called a phone number and worked out they were the front for Dutch cement empire LafargeHolcim.
- Best Makeup and Hairstyling: BPIC, a front for the vulture capitalists from Brookfield who are so adept at styling things up they managed to float at coal company last year (Dalrymple Bay), whose shares were immediately and suitably flogged on debut, to punters on the ASX and the gullible Queensland government. The boys from Brookfield also took the Aveo nursing homes to Bermuda and Healthscope’s 41 hospitals to the Caymans.
- Industry Award: Oil & Gas once again continued to tear up the environment, bribe politicians with large political donations and pay very little tax. No less than 6 oil and gas companies rank on the Top 40.
- Best Original Story: Uber Australia. These shysters appear to have paid tax for first time in 2020, a teeny bit. They continue to claim they they don’t have employees or contractors, only “partners” (the poor sod driving down the highway on a moped in the rain to deliver a pizza for $10).
The Good, the Bad and the Ugly
It is vital to stress that these figures are pre-pandemic. The coronavirus in 2020 is utterly distorting tax. Massive losses are creating years of tax losses. The likes of Qantas, from which tax paying years are rare anyway, will bank enough losses not to pay tax for many years to come.
This is why it is vital that the Government seize the opportunity to cap tax losses (they number of years they can be banked and deployed to avoid tax) as they do in the US and other countries.
A couple of other observations: as usual, the biggest tax dodgers are multinational companies operating in Australia. Australian multinationals are usually far better taxpayers – and we certainly don’t count Amcor among these, which has move to Switzerland.
BHP and Rio for instance paid about $4.2bn apiece in income tax last year. Gina Rinehart’s Hancock Prospecting and Andrew Forrest’s Fortescue were also enormous taxpayers (though the riches they are making from iron ore warrant a big rise in royalties).
The banks again, despite their other foibles, are huge taxpayers.
The reason we have not ranked Lendlease and other notorious tax cheats on the Top 40 is because we have stuck with the same methodology for calculating Australia’s top corporate tax cheats for years.
This is for the sake of consistency. The list is based on maths, the Tax Office annual transparency data; but tax is subjective. Airlines such as Virgin and Qantas can rightly claim aviation is a tough business which creates enormous tax losses.
Carmakers and ag companies likewise don’t pay much tax, sometimes for good reason, and coal companies, particularly those exposed to thermal coal, are stuck in a sunset industry where profits are hard to come by.
Some former top tax dodgers have been sufficiently chastened. Glencore, who had been appalling, has began to pay significant amount of tax in Australia and EnergyAustralia is not raking as much out to its Caribbean tax haven as it has in days of yore.
As for our winner, Exxon, they – along with Chevron and other oil giants, load up their Australian companies with costs so they eradicate all their taxable income here. No taxable income, no tax.
Their latest accounts show they paid $2.4 billion in dividends to shareholders over the two years to December 2019 and $4.3 billion in finance payments. You see, Exxon has teed up roughly $14bn in loans from itself – in previous years it has been higher but the Tax Office has brought pressure to bear – that is, the foreign Exxon companies lend money to the Australian company. The Australian company pays interest. That interest goes overseas.
Oh, and let’s not forget transfer pricing on the $4 billion in oil they purchase from other Exxon entities in Singapore etc.
Then there are the derivatives, the swaps and so forth. Many are the ways of extracting Australian wealth without paying tax.
Unfortunately, the business lobby is compromised and unable to assume even a skerrick of leadership when it comes to tax. All the Business Council of Australia can do is to call incessantly for lower taxes, even though roughly half their members pay little or no corporate income tax, or are prime movers in the tax avoidance fraternity – such as major law firms and Big Four orchestrators of tax dodging: EY, KPMG, PwC and Deloitte.