Australia’s 24 largest pay 2% tax

Posted by in Development, Economics

The Australian tax office has lifted the veil of secrecy covering the business affairs of some of Australia’s richest people, revealing for the first time details of the huge personal empires controlled by magnates including 7-Eleven founder Russ Withers, trucking tycoon Lindsay Fox, media operator Bruce Gordon and the Myer family.

The Australian Taxation Office yesterday released data showing 98, or 30 per cent, of 321 private companies with revenue in excess of $200 million a year paid no tax in 2014. This follows the release in December of tax information about listed companies and multinational corporations, and comes amid fierce political debate about the shape of the tax system as Australia prepares for a possible July election.

The data release was legislated by Labor in the dying days of the Rudd government as a tax transparency measure. The ATO figures disclosed revenue, profit and tax paid. For business, tax is calculated on profit. For some companies, the lack of a tax bill was the simple result of a bad year.

The data provides the first look at the finances of an exclusive club of 1500 companies that have been able to keep their affairs secret using a 30-year-old exemption from filing annual reports.

The $1 Billion Club:

Company Total income Tax payable % taxable
CBH Grain 3,436,600,727 0 0.0%
Insurance Manufacturers of Australia 3,391,305,834 132,482,105 3.9%
Hancock Prospecting 2,852,391,569 466,212,699 16.3%
RG Withers Holdings 2,638,702,596 36,782,526 1.4%
Pratt Consolidated Holdings 2,579,392,459 0 0.0%
BCG (Australia) 2,174,792,208 34,067,240 1.6%
Linfox 2,022,263,575 33,627,507 1.7%
Pomi 1,945,903,510 53,391 0.0%
Alinta Power Cat 1,698,802,352 0 0.0%
Baiada Poultry 1,589,659,728 23,170,912 1.5%
PFD Food Services 1,505,323,989 8,886,330 0.6%
Bartter Holdings 1,477,393,440 0 0.0%
WT Finance (Aust) 1,429,676,509 0 0.0%
Suttons Investments 1,420,797,910 17,030,266 1.2%
J. Hutchinson 1,363,061,430 4,321,546 0.3%
Tate One Holdings 1,209,324,056 0 0.0%
Honan Holdings 1,206,807,516 6,626,721 0.5%
Meriton Properties 1,191,052,037 75,919,996 6.4%
Emerald Grain 1,134,715,262 0 0.0%
Thomas Foods International Consolidated 1,092,504,883 32,733,974 3.0%
New World Holdings 1,081,429,063 0 0.0%
Commercial Motor Vehicles 1,060,011,329 7,762,760 0.7%
Australian Bullion Company (NSW) 1,029,275,434 3,353,025 0.3%
Olbia Head Coy Consol 1,000,977,859 0 0.0%
Total 41,532,165,275 883,030,998 2.1%

Source: 21 March 2016 Additional reporting by Leo Shanahan

Commentary in New Zealand’s Herald newspaper:

Christopher Niesche:

Australia’s people have been given unprecedented access into the tax affairs of the nation’s largest private companies and the information raises more questions than it answers. But one thing it is sure to do is to increase suspicions that corporate Australia is not paying its fair share of tax.

The data revealed that about 30 per cent of private companies with incomes of A$200 million ($224.5 million) or more pay no tax at all. It contains the names of many prominent Rich List families.

But the data also revealed that between them the 321 companies on the list have more than 11,000 associated entities, such as other companies, superannuation funds, family trusts, joint ventures and partnerships.

The tax and business affairs of the wealthy are undeniably complicated, but that is a huge number of associated entities by any measure, and a lot of nooks and crannies through which to funnel income to lower tax jurisdictions. Without a doubt some companies will use complex legal structures and overseas-based entities to reduce their taxable income as much as possible.

The revelations come as the Turnbull Government is considering a cut to the corporate tax rate after a concerted push by the business lobby. Although can anyone remember a time when the business lobby hasn’t been pushing for lower taxes?

The news will only serve to strengthen the perception that corporate Australia is not paying its fair share of tax and make any corporate tax cut much harder to sell to the general public.

Deborah Russell:

Any tax cut will have to be passed by the Senate, where the Greens are likely to hold the balance of power after this year’s election. Already the Greens have said they will block any company tax cut after these revelations.

The revelations are part of the Government’s fight on corporate tax avoidance, particularly by multinationals who can use their global structures to shift income to lower-tax or no-tax jurisdictions.

When the private company disclosure law was first introduced by the then Labor Government it would have captured any private company with an income of A$100 million or more. But this was bumped up to A$200 million by the present Government following the nonsensical argument by the business lobby that revealing the affairs of rich families would have made them takeover targets.

This appears to have given some large private companies the opportunity to restructure, such as splitting into two or more parts, to bring their taxable income below A$200 million and so avoid having to report.

The law follows other similar laws which also force large public companies to disclose more of their tax affairs. None of the data actually tells us much. It’s really all headline figures – income and tax paid. But at least it raises questions and will force companies to better explain themselves if their headline numbers raise questions.

Many companies are signing up to the voluntary tax disclosure code, which is expected to come into effect in the next year or two. This will allow those companies which are paying their fair share to explain their tax strategies and any anomalies to the public. Those which choose not to participate will inevitably face questions about why not, with the obvious implication that they have something to hide.

Tax avoidance thrives in an atmosphere of secrecy. The more information we can get the less these companies will be able to hide behind secretive structures and avoid their obligations. The data we received a few days ago is a start but more needs to be done.