The cat is out of the bag on corporate tax avoidance

by | Mar 4, 2016 | Business, Tax, The Economy

You would have to have been ensconced in the jungles of Africa on I’m a Celebrity Get Me Out of Here to have missed the corporate tax jihad this week.

Crestfallen at the failure of the government to raise the GST and lower company taxes, the nation’s peak business lobby group, Business Council of Australia, trotted out its heavy-hitters.

We believe we have stumbled upon a most amenable revenue raising opportunity: apply the existing laws.

Combank supremo Ian Narev, Qantas boss Alan Joyce, ASX chief Elmer Funke Kupper and Richard Goyder from Wesfarmers all expressed their disappointment. In the world of corporate rhetoric, “disappointed” is a strong word.

Unless their members are seen to pay their fair share, business groups will only find it harder to speak with credibility on tax. Photo: Erin Jonasson

“We absolutely will not resile from the need for overall structural reform in tax,” a defiant council president, Catherine Livingstone, said.

This set us to thinking, how much tax does the Business Council itself pay? It is hard to tell from its latest set of financial statements as – ahem – these have not yet seen the light of day and are, therefore,  more than four months late.

Surely, this must be the rarest of oversights from the body that “facilitates the contribution of more than 100 of the country’s business leaders to public policy and employment best practice in the interests of the nation and all Australians”.

Not so. Searches show eight of the past 16 of the BCA’s financial statements, from 1999 to 2014, were filed late. Deploying the “glass half full” approach, the council, ably assisted by its auditors from PwC, successfully complied with the Corporations Act at least 50 per cent of the time in the past 17 years.

Like the peak body, this correspondent is also worried about the future of the nation. We, too, would prefer a lower corporate tax rate to promote economic growth and mend the budget. If that remedy is not available however, we do believe we have stumbled upon a most amenable revenue-raising opportunity for government: that is, apply the existing laws.

Section 319 of the Corporations Act says companies limited by guarantee (such as BCA) must file their accounts within four months of the close of the financial year. Not to do so constitutes an “offence of strict liability”.

What then is the penalty for breaking the law? Schedule 3 Penalties, Item 112, says the penalty for breaching Subsection 319 (1) of the Act is “60 penalty units or imprisonment for 1 year, or both”.

If a penalty unit is $170, then one year’s breach equates to $10,200 and eight years’ breaches $81,600.

This calculation doesn’t include the 2015 accounts, which a spokesperson for the BCA said had been filed on time. Perhaps they have not been processed yet.

Illustration: Michael Mucci.

In any case, as the council, by its own admission, is at the vanguard of best practice, and is most instrumental in influencing government policy on behalf of all Australians, we put this question: “In the interests of good corporate citizenship and setting the right example, would BCA be prepared to pay this amount, even if ASIC were not to take action under s319?”

As at deadline, no response was forthcoming. This is disappointing, as yours truly, like other reporters in the finance area, has been bombarded by unsolicited BCA communications for years and this was only the second time we had returned serve and solicited a communication from the communications body. (No luck the first time either.)

A spokesman for the regulator said: “ASIC does not comment on operational matters.” To give it its due, though, in the year and a bit to December, it prosecuted 44 companies for 212 offences with fines ranging to $20,000 per offence for late filing, non-filing and failure to hold annual meetings.

A credibility problem

The business lobby has a credibility problem, and the BCA and others need to address it. The cat is out of the bag on corporate tax avoidance. It will not go back in the bag. The public now knows it is being fleeced.

Unless their members are seen to pay their fair share, business groups will only find it harder to speak with credibility on tax. How can the BCA be taken seriously when its members include reps from Chevron, Shell, the ATO’s “number one tax risk” News Corporation, the very architects of the world’s most aggressive tax schemes E&Y, KPMG, Deloitte and PwC, foreign investment banks, all the major tax law firms, and McDonalds and Google?

It can’t. Advocating that a GST be foisted on those who can least afford it, when large multinationals operating in Australia are paying a pittance, no longer washes with the public.

Incidentally, although Qantas is by no means in the same stratosphere as the aforementioned avoiders, as its chief, Joyce, was lamenting the high tax rate, it is worthwhile noting the national carrier has paid no net tax in six years.

Having enjoyed a $129 million rebate in 2010 and paid very little tax since, Qantas is $122 million in the black versus the ATO and perhaps other revenue authorities over six years. At least, that’s what its cash-flow statements show.

Of course, Qantas suffered that humungous loss in 2014 and running the airline is perhaps the toughest corporate gig in Australia, so Joyce can be forgiven for whinging about the tax rate.

That said, his preferred profit metric is to report “underlying profit before tax” (on which executive salaries are measured) and this was $1.55 billion for the period; and in the recent interim result, a mere $1 million tax was paid on a profit of $688 million or $983 million before tax.

All for one, none for all

So, does the BCA pay tax? No, it is a company limited by guarantee and, like other unions and not-for-profits, is not required to pay tax. In 2014, its 121 chief executive members – it is effectively the CEOs’ union – tipped in almost $8 million in fees and there was a deficit of $563,673.

The key reason for the deficit was two major projects that cost $821,352, one of which was espousing tax reform, so you can see why the council is cranky with the government: tax reform stasis.

We conclude with a some words from a BCA press release of March 2014 welcoming the Royal Commission into Trade Union governance and corruption: “The Royal Commission should investigate whether there are systemic and accountability failures …”

BCA’s rival unions might well ask: “Brothers and sisters, where is the solidarity?”


Michael West

Michael West

Michael West established to focus on journalism of high public interest, particularly the rising power of corporations over democracy. Formerly a journalist and editor at Fairfax newspapers and a columnist at News Corp, West was appointed Adjunct Associate Professor at the University of Sydney’s School of Social and Political Sciences. You can follow Michael on Twitter @MichaelWestBiz.


  1. Avatar

    Actually I did miss the corporate tax jihad that week but did notice lot’s of subsequent media comment, even some supporting the call for overall tax reform.

    Very public tax reform debates and protests have been around forever but the likes of BCA have thrived. Small businesses and their employees are increasingly the losers and have far more votes plus voter support than BCA officers and their supporters.

    Governments have known the above, so why don’t elections increasingly return candidates who are anti “big” business and pro small business?

  2. Avatar

    The culture of tax dodging does little except reward desk jockeys for moving cash around in the right way. These loopholes serve no actual purpose except to make work for overpaid paper pushers. We must declare war on these bureaucrats. Kafka would smile upon us.

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