18 December 2015
by Neil Chenoweth

Tax Office bares all: the good, the bad and the ugly

How some companies cut billions off their tax bill

The historic release of individual tax data for 1539 of Australia's largest public companies on Thursday revealed the country's biggest and smallest taxpayers, providing surprises with the struggles of foreign-owned companies.

The release of tax paid by 554 large Australian public companies and 985 foreign-owned corporates provided the first direct public confirmation of cash tax payments by the country's largest taxpayers, headed by BHP Billiton, which paid $4.1 billion, Rio Tinto ($3.5 billion) and the four big banks, which paid a total $9.5 billion.

Among the technology companies, Apple and Microsoft's tax figures were in line with what they told the Senate inquiry into corporate tax avoidance earlier this year. Google told the Senate its pre-tax income was $58.7 million with tax payable of $11.7 million based on its 2014 calendar year, the ATO data showed $90.9 million of taxable income and tax payable of $9.2 million, perhaps reflecting a different period.

Toshiba, Capgemini Australia, Citrix Systems, Acer, Nokia Solutions and Networks, Alcatel-Lucent and Hewlett-Packard all paid zero tax.

In a statement, Tax Commissioner Chris Jordan accused some multinational companies of being "overly aggressive in the way they structure their operations", but cautioned that "no tax paid does not necessarily mean tax avoidance".

In total 579 companies paid no tax, reflecting difficult trading conditions for miners, manufacturers and agricultural companies. The worst performers were foreign banks, with 45 per cent failing to break even. "There are some reasons why it would be some companies are not paying tax at all, particularly in circumstances where there might be losses," Assistant Treasurer Kelly O'Dwyer said.

Troubled gas company Santos paid 11 per cent based on its taxable income, which was quite a bit lower than the 34 per cent "effective tax rate" disclosed in its statutory accounts.

In a statement Santos ascribed the anomaly to differences between accounting standards and tax law, in particular unrealised foreign currency movements and a $624 million capex deduction that reduced taxable income to $27 million.

Taxes too high argument
Biotechnology company CSL, which is building its newest manufacturing plant in Switzerland after arguing taxes in Australia are too high, paid no tax on a total revenue of $2.1 billion and taxable income of $130 million. CSL chief financial officer Gordon Naylor has used the Swiss decision to demonstrate the need for a special 10 per cent tax rate for advanced manufacturers operating in Australia.

"Corporate income tax is a critical part of the Australian social contract," said former treasurer Wayne Swan, who introduced the tax transparency legislation in 2013.

"Assuming conservatively that 10 per cent of corporate revenue is lost due to aggressive minimisation and evasion, at a minimum, the cumulative cost to the budget is $26 billion over four years," he said.

The ATO release also showed BHP Billiton was the only Australian miner to pay the Mining Resource Rent Tax last year, contributing more than half of the $288 million raised. Australia's largest iron ore miner, Rio Tinto, paid zero MRRT.

Besides the $153.7 million paid by BHP Billiton, all of the rest was paid by Japanese miners Mitsui ($72.7 million) Itochu ($40.8 million) and consortiums including Mitsui, Nippon Steel and Sumitomo ($20.7 million).

Separately, BHP Billiton paid $967.8 million in Petroleum Resource Rent Tax, which again was more than half of the $1.77 billion raised by the PRRT.

Esso Australia Resources was the other major PRRT payer, contributing $538.5 million.