Thursday, 9 April 2015

While we are waiting for hearing transcripts to be published in the Australian Senate inquiry into tax avoidance and aggressive minimisation, here are a few 'facts' on record

This post is updated as new information becomes available.

According to the Australian Taxation Office:

In 2012-13, corporate tax revenue collections totalled $66.9 billion, 28.3% of the $236.6 billion in total income tax revenue, making it the second largest contributor to the tax revenue base after individuals…..
For public companies, those listed on the ASX account for 40.8% of net tax. The largest 200 ASX listed companies by market capitalisation6 contribute 97% of the net tax of all ASX-listed companies and the top 50 accounts for 82%.The financial services and mining sectors accounted for over half of the total corporate income tax revenue.

Australia has a corporate effective tax rate of 30%.

While Australian voters wait to see what detail hearing transcripts may reveal here is a snapshot of what some companies, who all asserted that they complied with Australian taxation law, had to say about their own effective tax rates in submissions to the current Senate inquiry:

* Aurizons average effective tax rate for the period ended 30 June 2013 was 2%.
Auizon (formerly QR National Limited) was privatised in 2010 and is listed on the Australian Stock Exchange. 
Aurizon asserts its low effective tax rate between 2011-13 arises as a result of Aurizon recently entering the federal tax regime
* Fortescue Metals Group Ltd’s effective tax rate for the period ending 30 June 2015 was 29.98%.
Fortescue has eight foreign subsidiaries which operate commercial businesses in their respective jurisdictions.
Fortescue has a US$ functional currency for income tax purposes.

* Mirvac Group admits to a low effective tax rate but declined to state a figure.
Mirvac Limited operates the development business which comprises of both residential and commercial development. Mirvac Property Trust maintains an investment portfolio that invests in office, retail and industrial assets. The Mirvac Group is an Australian business operating principally in Australia; the group has negligible overseas operations or investments.
Overseas operations and investments currently generate less than 0.2% total revenue of the Mirvac Group.

* Origin Energy Limited’s effective tax rate for the period ending 30 June 2014 was 15%.
Origin stated; with respect to effective tax rates we note that we have been unable to reconcile Origin’s financial information and lodged tax return data to the data presented in The Tax Justice Network - Australia report issued in September 2014. We have however provided our internal analysis of effective tax rates for the last 10 financial years ended 30 June 2014….

* Deloitte Touche Tohmatsu failed to mention its own effective tax rate status.

* Toll Group’s “normalised” effective tax rate for the period ending 30 June 2014 was 23%.
“Normalised” is defined as; Eliminating large once-off adjustments such as the impact of impairments etc.

* ANZ Bank denies having an effective tax rate of 27% for the period 2004 to 2013. It asserts a tax rate of 29.3% in 2013 and, a global effective tax rate of 32% in that same year.

* Rio Tinto stated; the corporate income tax charge to the UK statutory tax rate of 23%. The effective corporate income tax rate on underlying earnings was 34.9%.
“Underlying earnings” are; An alternative measure of earnings which is reported by earnings Rio Tinto to provide greater understanding of the underlying business performance of its operations.
The company reportedly set up a marketing hub in Singapore around 2005 when Rio Tinto Singapore Holdings Pte. Ltd was created. This marketing hub's effective tax rate is est. 5% per annum until 2022 and, Rio Tinto's Australian operations are billed for ore sales by Rio Tinto Singapore in order to transfer cash to this low tax country bypassing a percentage of Australian tax.

* Newcrest Mining declined to state an effective tax rate, instead stating its; taxation payment profile over the last decade has been lower than would be anticipated by reference to its reported accounting  profit due entirely to the application of ordinary Australian taxation rules…

* Macquarie Group stated; Macquarie’s effective tax rate is largely driven by the geographic location and mix of the income derived in any particular reporting period. The Group’s tax rate has been 38% or higher for each of the last four reporting periods. The amount of income tax paid will vary from the Group’s effective tax rate in any given period……

* Google Australia did not state an effective tax rate for its Australian operations. Instead stating that globally its overall corporate tax rate in 2014 was about 19%.
Google Australia also mentioned that Singapore had a tax rate of 17% and reportedly admitted that most of its Australian revenue was booked by an affiliate business in Singapore, presumably to take advantage of Singapore’s lower corporate flat tax rate for profits above S$300,000.

* Lend Lease denied its effective tax rate was 15% for the 10 year period to 30 June 2013. Citing instead a statutory effective tax rate of 21.2%.

* BHP Billiton did not state the effective tax rate on its Australian operations. Instead stating that its; average global effective tax rate for the past three years is 29.3%.
All calculations used in its submission are in US currency. 
BHP Billiton has set up a marketing hub in low tax Singapore. 
It refused to answer questions during the Senate inquiry hearing concerning details of this marketing hub. 
However, a document titled BHP Billiton Marketing AG Singapore Branch Registration Number: F00006681W Annual Report Year ended 30 June 2014 became publicly available.
This document disclosed that for the period ending 30 June 2014 the company had an effective tax rate in Singapore of 17%
The company having been granted the status of a Pioneer Service Company (Certificate No. COY-10- IHQ/B340-1/2) by the Singapore Government, the effective tax rate had no effect and therefore BHP Billiton paid no Singapore taxes between 1 July 2005 and 1 July 2015.
It has also been granted the Development and Expansion incentive (Certificate No. SO5/1-23624909) which gives it a concessional tax rate of 5% from 2020.
BHP Billiton's total comprehensive income for the financial year 2013-14 ($941.174 million) appears to have been processed through its Singapore marketing hub and then repatriated to its head office incorporated in Baar, Switzerland.

* AGL Energy denied that it had an effective tax rate for the seven years to 30 June 2013 of 24% and that the average annual tax foregone by AGL was $26m per annum
Instead asserting that its effective tax rate for those years was closer to the corporate tax rate of 30%.
It stated an effective tax rate for the period ending 30 June 2014 of 28% based on underlying profit before tax and, an effective tax rate of 25% for the same period based on statutory profit before tax.

* Microsoft Australia stated its effective tax rate in Australia for each of fiscal years 2014, 2013, and 2012 was above Australia’s statutory tax rate of 30%
However, the company’s regional operating centres in Ireland, Puerto Rico & Singapore generated 81% of its foreign earnings in 2014 and these earnings appear to have a combined tax rate of 17.1%.
The Singapore operating centre represents billions in customer revenue earned and operating expenses incurred serving 18 countries throughout Asia Pacific, including Australia.
The profits earned throughout Asia Pacific are earned primarily by the Singapore ROC group. Microsoft admitted that all $2 billion in Australian 2014 revenue was paid to its Singapore regional operating centre.

* Apple Pty Ltd incorporated in Australia asserted it paid an effective tax rate of over 30% in Australia in the two years after the Advanced Pricing Agreement with the Australian Tax Office has expired.  However, the Australian company is wholly-owned by Apple Ireland and the majority of its revenue is transferred through billings to Ireland where it would appear the effective tax rate can be as low as 12.5% for trading income and 25% on all other income including non-trading income and non-qualifying foreign dividends.


Anonymous said...

Big storm in a teacup by the grandstanding ambitious new Senator Dastyadi, you know, the man who used his unions funds to pay the legal bill of one brothel loving Craig Thomson! It'll all end up exactly as the last Senate investigation where Kerry Packer scared the pants off them ad they found no tax avoidance!

Anonymous said...

Just had to post showing the level of expertise at the Tax Avoidance inquiry -
Senator Chris Ketter: Mr King, it has been reported that Apple paid $80 million of income tax on revenue of more than $6 billion.

Senator Sean Edwards: Revenue or turnover? Are you talking about turnover or profit?

Ketter: It is revenue. Mr King, would you describe Apple’s tax planning ­approach in Australia as being ­aggressive?

Apple Australia chief Tony King: No, I would not … Our books and records are very simple. All of our sales and revenue are recorded in our books here, all of our cost of doing business is recorded in our books and our net income is clearly reported as well. Our tax is paid on our net income, and last year it was paid at an effective tax rate of just over 30 per cent.

Ketter: Have I got those figures wrong?

King: Our revenue in our most recently reported financial statements was approximately $6bn — that is correct — and our income tax expense was around $80m.

Ketter: Can you explain how you get that effective rate of tax on a turnover of $6bn?

King: Yes. It is because the tax is paid based on the NET PROFIT; it is not based on the REVENUE!

What an OMG moment, just how could this dumb Senator make a decision about anything (yet his bio claims he has a B. Comm, has anybody checked)?


And secondly the cost of Victoria's Andrews Government ripping up the big E-W Link Toll Road contract will be at least Half a Billion dollars (just think how many pensioners that could enjoy that money as a nice Xmas bonus, perhaps). Bloody hell, no wonder people minimise their tax paid when a govt pays half a billion dollars to NOT build a needed road. Taxpayers should revolt!