Sir Crook
Ex Member
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Zero tax: Half of Australia's 1300 public companies have been under ATO review
Date
December 17, 2015
The Age
About half the nation's 1300 public companies that will have their tax details publicly revealed have been under review by the Australian Taxation Office.
Tax Commissioner Chris Jordan will on Thursday release the tax details of 1539 corporate entities – 985 of which are foriegn-owned, and 554 of which are Australian foreign entities.
There are some companies on the list – both tax paying and non-tax paying that we will be looking at more closely
ATO Acting Second Commissioner Jeremy Hirschhorn
The results will show a high number of public corporations with zero tax bills – this is either because they did not pay any tax, had offsets against profits that reduced their tax to zero, or, they made a loss, which the Tax Office will report as nil.
Out of 1539 corporate entities, 38 per cent did not pay any tax in 2013-14, 22 per cent incurred a current year loss, 8 per cent offset tax profit against prior year tax losses, and 7 per cent used franking credits and other offsets (such as foreign tax credits and research and development tax breaks) to reduce their tax.
Since many multinationals have more than one "tax group" within the same company, the ATO has narrowed down the data to 1331 "economic groups".
Of the 1331 economic groups, 26 per cent did not pay tax in 2013-14, 14 per cent incurred a current year loss, 7 per cent offset tax profit against prior year tax losses, and 4 per cent used franking credits and other offsets to reduce their tax.
Many of the companies reporting a loss were in the mining and manufacturing sectors.
In total the ATO collected almost $40 billion in tax from these companies, before any compliance action. But once audits take place this figure could increase to $41.5 billion.
ATO Acting Second Commissioner Jeremy Hirschhorn said about half of the entities on the list "are currently or have been subject to some form of one-on-one ATO review over the past three years".
He said following reviews and audits, the ATO raises about $2 billion in liabilities and $1.5 billion in collections from this large business segment every year.
The ATO's list is the result of tax disclosure laws passed under the former Labor government that require the Commissioner to publish the tax details of public and private companies with $100 million or more annual turnover.
The laws were watered down by the Coalition government following intense lobbying from those in business and tax circles to remove private companies from the reporting requirements.
But then the Greens struck a last-minute deal with Treasurer Scott Morrison that will see the tax details of about 300 private companies published.
Mr Hirschhorn said that the details of those 300 private companies would be published some time in March.
He said Thursday's list of public companies was aimed to give the public a more transparent picture of the taxes multinationals pay, and it would include income, taxable income (taxable profit) and tax paid.
There may be legitimate reasons why companies have no tax payable. "Nil tax payable does not equal tax avoidance," he said.
But there were still going to be companies that raised red flags. "There are some companies on the list – both tax paying and non-tax paying that we will be looking at more closely," he said.
The ATO said about 63 per cent of all ASX-listed companies reported a loss to their shareholders in the 2013-14 financial year.
Of the ASX 500 – similar to the Australian public entities included in the ATO's list – between 20 per cent to 30 per cent of companies reported a net loss in 2013-14.
Mr Hirschorn said the ATO had analysed data over 10 years and in any given year about 20 per cent of the ASX 500 had made an accounting loss. "That's higher than most would expect," he said.
The data also shows splits by industry. Energy and resources were the sectors that had the highest level of nil tax (both Australian-owned and foerign-owned), followed by manufacturing (Australian-owned) and banking and finance (foreign-owned).
The high percentage of people in mining who paid no tax in 2013-14 reflected conditions in the Australian economy, Mr Hirschorn said.
"At a macro level that makes sense as commodity prices came down but the Australian dollar was still high," he said. "And manufacturing was pretty hard [that year]."
If companies were starting up or investing heavily, and did not have much income, they also may not have a taxable profit in that year, he said.
In terms of companies that did not have a significant permanent establishment (a physical location) in Australia – and therefore Australia had no or little taxing rights – Mr Hirschorn said the company would sometimes have a subsidiary. That subsidiary may be the subject of tough anti-avoidance laws introduced under former treasurer Joe Hockey.
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