Investors always hear a different story to the Tax Office. CSR’s investors have been hearing about four years of solid profit growth, low interest rates, and rising demand for building products; products such as Gyprock, Bradford, PGH and Hebel. But CSR, like rival building products group Fletcher Building, has enjoyed the upswing in Australia’s building boom in recent years but managed to pay no tax. Tax losses have been key. The company has built a fortress for a tax loss shelter.
Its historic sugar division was sold to one of Asia’s biggest multinationals, Wilmar, in 2010 and Wilmar International Holdings has notched up income of $5 billion over three years and also paid zero income tax.
CSR told us that tax was paid by the company’s aluminium division. It is a major aluminium producer and indeed its Gove Aluminium Finance Limited is shown as having declared $1.5 billion in total income, $323 million in taxable income – a decent 5.6 per cent margin befitting the five year upswing in aluminium prices – and tax payable of $86.6 million for a tax rate of 26 per cent. Like Swiss Re, our #40 in the Tax Dodgers rankings, it appears the small part of the business may be paying tax but, sadly, not the bigger.
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We are counting down the Top 40 Tax Dodgers. There are now three 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 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 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 three years.
Qantas, therefore, is not on this list. Although it made $46 billion total income over the ATO's three years, it was able to reduce this by 99.4 per cent to $264 million, just missing our cut-off.
Taxable does not mean taxed. It paid zero.
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".
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 response to the censorship scandal which has engulfed the ABC in recent days as the government sought to muzzle its corporate tax coverage, the Tax Office put out a useful statement on its transparency data.
In this, the first iteration of michaelwest.com.au corporate tax rankings, we are going 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 by no means perfect. But sometimes we can identify patterns. In many 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 trust 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.