The Australian Taxation Office has for the first time released the names of large private companies that paid no corporate tax during a financial year. This reflects the agility and innovation of Australia’s wealthiest private companies when it comes to paying tax, rather avoid it.
Fact – These companies (for each of the company on the ATO’s list, total income of $100 million or more during the year) managed to pay $2 billion (only) net tax, on total income of $145 billion in 2013-2014. The taxable income of these companies was mere $5 billion (net and $8 billion gross).
The trick of course is to get one’s taxable income down as much as possible before one has to pay tax on it. Refer below for few interesting numbers:
- 12% were exempt from handing over cash to the ATO because they incurred an accounting loss for the current year.
- They utilised prior year losses or franking credits, while some companies on the list have related entities that did pay tax.
- Some of the companies are also entitled to offsets, such as those associated with the Research and Development Tax Incentive.
- The other notable figure in the Tax Office presentation is the 11,000-odd entities associated with those 321 private companies, and utilising their losses. Many of them are super funds, family trusts, joint ventures and partnerships, entities which are mostly not captured in the data released by the ATO.
Few interesting details have come out from the disclosure:
- Gina Rinehart’s Hancock Prospecting was the biggest taxpayer on the list, with $466 million paid.
- Trucking magnate Lindsay Fox’s Linfox paid $33 million.
- The Myer family’s investment vehicle forked out $12 million.
- The investment vehicle for former packaging king Dick Pratt, paid zero on taxable income of $36 million and total income of $430 million.
- German giant Hochtief paid zero tax despite $137 million in taxable income.
- Babcock & Brown International is still alive and no tax paid, despite a $681 million income.
- Wall Street giants – Goldman Sachs and JP Morgan, managed to pay no tax despite respective incomes booked at $632 million and $1 billion.
What’s Next?
The Tax Office ought to grade these big corporate players into good taxpayers and bad. Over time, a picture is then likely to emerge about who the good corporate citizens are.
There been some “restructuring” by some of the private companies to push their disclosures under the threshold, perhaps by the more agile ones, by splitting there businesses.
Another factor in the disclosures was that only 200 of the 321 entities consolidated for tax… keeping them under the threshold.
It’s not all dark though… there is silver lining in cloud
Unlike in the old days, authorities now have sophisticated data analysis capabilities which can more comfortably evaluate data from 11,000+ entities.
So while tax advisers toil tirelessly, and at enormous expense, to help their large clients skive out of paying tax, the Tax Office has technology on its side.
Possible Outcome
If the ATO was really serious about getting more tax out of private companies, one initiative might be to stop tax deductions for tax advice.
Irony
One, ordinary PAYG tax-paying citizens are effectively subsidising the efforts of the super-rich, and indeed the efforts of their richly remunerated advisers, to get their tax bills down… the largest institutions in the world remain well outside the disclosure net.
Second, the big four global audit firms – PwC, E&Y, KPMG and Deloitte – don’t have to publish accounts. Yet they advise multinationals on minimising tax while simultaneously advising governments on tax policy.
My Suggestion – MINIMUM ALTERNATE TAX
The Indian government is continuously striving to make the tax-payers spectrum broader and to ensure that no individual or company that is earning a substantial profit gets to avoid payment of income tax. All such taxes payable by entities fall under either the direct tax category or the indirect tax category. Minimum Alternate Tax (MAT) is a tax payable by companies and falls under the indirect tax category.
More details here: https://www.bankbazaar.com/tax/minimum-alternate-tax.html
This can help in cornering the such cases of high book profit, low tax bill entities.
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