Australia lays bare corporate tax details
The Australian Government’s efforts to improve tax collections are more urgent amid falling revenue from weak commodity prices, the Wall Street Journal reports
Malcolm Turnbull’s government took the rare step of making public the tax affairs of scores of multinationals, highlighting that many big names—including Apple Inc. and Volkswagen AG —paid minimal amounts, if any, last year in Australia.
General Motors, Mitsubishi, Exxon Mobil, Ford and Chevron were also among those named Thursday in a report revealing that one in four major companies, after accounting for losses and business allowances, paid no tax in Australia in the fiscal year through June 2014.
Assistant Treasurer Kelly O’Dwyer said the government was determined to make sure businesses paid their fair share of tax following publication of the Australian Taxation Office data, which laid bare the tax details of more than 1,500 local and foreign companies with income of more than 100 million Australian dollars (US$71.8 million) in that designated tax year.
Ms O’Dwyer said the findings didn’t necessarily mean all of those named were avoiding paying tax. “There are some reasons why it would be that some companies are not paying tax at all,” she told reporters. “It’s for those companies to explain exactly why it is.”
Successive governments have ordered a crackdown on corporate tax avoidance. Australia also strongly backs efforts by the Organization for Economic Cooperation and Development to claw back an estimated US$100 billion to US$240 billion in lost tax revenue each year.
The task for Mr. Turnbull’s conservative government has gained urgency as the resource-rich country struggles to balance its budget against falling revenue from sinking commodity prices. Earlier this month, the government reached a deal with its Greens opponents to pass laws forcing multinationals to be more transparent with their tax affairs.
In April, Australian lawmakers summoned tech giants Google, Apple and Microsoft, as well as miners BHP Billiton and Rio Tinto, before an inquiry to explain their complex global tax arrangements, which often include transferring profit to lower-taxing jurisdictions like Singapore and Ireland. Australia’s corporate tax rate is 30%.
Thursday’s report showed that Apple’s Australian unit paid A$74.1 million in corporate tax in the specified fiscal year on income of A$6.1 billion, and against a taxable income of A$247.4 million. Microsoft paid A$31.2 million on total income of almost A$568 million and taxable income of A$103 million.
All the companies called before Parliament earlier in the year denied wrongdoing and said their tax arrangements were fully compliant with Australian law. On Thursday, Apple reiterated that position, adding that it “paid the full company tax rate of 30 percent” in Australia.
A local energy company named in the ATO report, Santos Ltd. , said its high level of tax deductions in recent years reflected heavy investment in projects that are just beginning to generate revenue. Other companies, including Exxon Mobil Corp. and Chevron Corp., similarly said the level of tax they owed that year was heavily influenced by big deductions for multibillion-dollar investments in massive projects—a position that would change when production begins.
Companies cited as paying no tax at all were mostly operating in the resources and finance sectors, which is likely to concern the government given the dominance of both in Australia’s A$1.6 trillion economy.
Among the foreign banks with Australian affiliates that paid no tax were JP Morgan Australia, Goldman Sachs and Credit Suisse. The energy giants included Exxon Mobil and Chevron Corp., while Peabody Energy Corp. and Newcrest Mining Ltd. were among the mining companies named. BHP Billiton paid A$3.9 billion on total income of A$40.5 billion and taxable income of A$13.7 billion. Rio Tinto coughed up A$3 billion on total income of A$33.6 billion, and taxable income of A$10.7 billion, according to the report.
Australia’s big four banks all paid tax, including A$2.8 1 billion from Commonwealth Bank and A$2.4 billion from Westpac Banking Corp. Still, some of the country’s biggest corporate names paid none in the designated fiscal year—including Qantas Airways, which had income of A$14.9 billion but recorded a large loss as it wrote down the value of its fleet by billions of dollars and booked various types of restructuring charges.
“We’ll go back to paying company tax as we return to profit, and have continued to pay other forms of tax,” a Qantas spokesman said. News Australia Holdings, the Australian arm of The Wall Street Journal publisher NewsCorp, paid no tax and had no taxable income on total income of A$2.8 billion.
Global automobile makers Ford, General Motors and Mitsubishi, which have all now shuttered manufacturing operations in Australia due to high local costs, all paid no tax that year. European car maker Volkswagen’s Australian unit paid almost A$10.5 million on total income of A$1.9 billion and taxable income of A$43.9 million.
A spokesman for GM said it wasn’t required to pay any tax because it made a loss during the year driven by more than A$300 million in employee separation charges as it downsized its business in Australia, moving away from manufacturing vehicles locally.
Australia’s tax commissioner, Chris Jordan, said the data, released under new transparency laws, would help boost public confidence in the tax system. “Large corporates now have to consider the impact of their tax information as a factor in managing their reputation with the markets, their shareholders, their consumers and in the Australian community,” he said.
But Peter Burn, a spokesman for the Australian Industry Group, which represents businesses, said some companies would be concerned about the risk of such information being misunderstood or misinterpreted when they weren’t necessarily doing anything wrong.