Sort of a double message from the Govt insofar as they say we will really hammer these efforts to avoid our tax but here is a further tax cut for you big businesses. Reality is that we get lots of talk about how it will occur but on the ground mostly there is silence. Sure we see the occasional court case but most get settled with far easier terms than most private citizens will ever see.
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That depends on oneās perspective. Shifting to individual rather than corporate, if you are an American citizen FATCA compliance for the US IRS makes the ATO look like a pussycat. 
In parts of the world āforeignā (eg non-US) financial institutions are refusing Americans as customers, but I have recently learned that even many US financial institutions are refusing or severely restricting the accounts of expat US citizens because of the ridiculous compliance and complexities.
I cannot imagine what the accountants for multinationals must go through to both play their games and also file that will withstand audits.
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So in effect youāre saying Australians would be incapable of innovating business ourselves? Do you really believe these megacorps are that quintessential and that if they leave we will become a third world country?
Yes, but as a small business you spend the total and more of any savings you make on the accountants who are trying to work out the ATOās complexitiesā¦ and remember, if they get it wrong, the business owner pays. [quote=āphb, post:16, topic:14862ā]
then they pay tax in Australia from such income (providing they donāt have some sort of tax avoidance scheme in place
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Thatās what weāre talking about hereā¦ itās great the ATO is doing something about this but to what cost to the tax payerā¦ is it fair we pay for these investigations and court cases with megacorps that could quite possibly buy Australia a couple of times over?
Well thatās greatā¦ we need to eat but much of our farmed food is exported, often by megacorps. Why should there be massive tax advantages for, say, mining companies who take and destroy from our environment to no real benefit to the average tax payer?
Your justification seems to be what one would expect from someone making their living working in accounting and if so, Iām sure youāre very good at it, but once againā¦ is it right? Can we not look at a change that could benefit the greater population rather than a few overpaid CEOs? When you see these enormous companies fighting legal cases against smaller entities, local governments etc and then, at the same time, making mega profits with no tax being paid, does it not make you feel that somehow perhaps youāre being swindled?
Thatās greatā¦ letās hope they get past the āconsultation phaseā because at the moment, that statement is pure rhetoric.
The main tax advantage for miners, often reported in the media and the green movement as government subsidies, if fuel excise exemptions.
Fuel excise was originally introduced as a method to provide road infrastructure funding. The mining and agricultural industry argued fhat they are high fuel users and that the equipment using such fuels do not use or damage road infrastructure (they are off road vehicles and not registered for use on public roads) and such should be exempt from the tax.
Mining companies still however pay fuel excise for their road going vehicles.
While it may seem unfair to some, it is supported by the user pays principles which governments have moved towards over recent decadesā¦rather than everyone pays even if one doesnāt benefit from the service.
Mining companies pay all other applicable taxes and have deductions available to them like other businesses.
Mining companies also pay state based royalties based on the total production of the mineral resource. This is unlike many other countries which have a profit based royalty system, possibly similar to the Commonweaths Petroleum Resource Rent Tax. The state royality system ensures mining companies pay for every tonne of mineral won, rather than if they product a profit. This ensure that the return to the state governments is independent of the profitabilitty of the mining company, which is a lot fairer than other models.
Surprisingly most food grown in Australia is still grown by family businesses. Bulk exports are also often coordinated/supported by grower associations or through businesses with experiences in such areas (e.g. Australian Wheat/Wool Board) or the business which processes the raw products (e.g. CSR for sugar). There are examples of foreign investment in agriculture such in meatworks and the milk processing industry. At the end of the day, without this foreign investment, it would be very difficult for the family farm business to export their products. This investment also creates a market for excess commodities Australia produces.
I agree wholeheartedly. It is likely other countries will be watching Australia how deals with current over boarder profiting shifting, and will also be doing likewise.
Current return on costs is significant and warrants the ATO pursuing (namely proceeds from court decisions far exceeds costs to take action).
While the costs are unnecessary if the profit shifters had done the right things to start with these costs would not have been incurred, letting them get away with it would have resulted in less next tax revenue.
The actions of the ATO are also likely to change behaviours n in the business subject of the ATO action as well as other businesses who might think again about trying to cross the line to maximise profits.
Courts also have the ability to award costs in some casesā¦Iāll have to check individual cases to see if the ATO requested costs to be awarded to the other party, and whether the court agreed.
An article regarding attempts to tax the unholy trinity, Amazon, Google & Facebook.
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And still the failure to tax them is on-going:
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Multinational tax avoidance is more sizzle than steak.
By the ATOās own figures, it isnāt costing Australiaās budget large amounts of money. If you are worried about Australiaās budget, you should be looking elsewhere, by an order of magnitude at least. Put another way, Iām sure that eventually the ATO (/OECD) will sort out multinational tax avoidance, particularly for purely digital plays, but donāt expect it to be rivers of gold. It wonāt get us out of our budget black hole.
As is typical of economically illiterate media reporting:
Itās been [revealed that Netflix pays an effective tax rate of around 0.5% in Australia on between $600 million and $1 billion in revenue.
Memo to every finance sector journo ever: Companies pay tax on profit, not revenue.
The percentage quoted (0.5%) is relatively meaningless and absolutely cannot be compared with the corporate tax rate of 30%.
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All the press and all the hand wringing. As Greta noted about climate change protests, they accomplish mostly nothing, as did reports about corporate tax evasion and offshoring behaviour.
Business as usual in the corporate worldā¦
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Read the full ABC article though. Despite the āamateur hourā headline, the details are more informative and suggest that not much hand wringing is warranted.
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Seems like some of the examples have a return on turnover that suggests they would be wound up if that was the whole story, does it not?
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It is not safe to generalise. Different companies are in different situations. Best to examine the accounts of a specific company and form an opinion - as Iām sure the ATO does!! (and as the ATO states in the article)
The following from the article at least gives some background.
The reasons why 710 companies did not pay any tax in 2017-18 included:
- 269 entities that reported a taxable income but prior-year losses were available to deduct against that profit, so no tax was payable
- 242 entities reported an accounting loss
- 146 entities reported an accounting profit but reconciliation items (such as tax deductions allowed at higher rates than accounting permits) resulted in a tax loss
- 53 entities reported a taxable income but were also entitled to offsets (such as the research and development tax incentive) at least equal to the tax otherwise payable
and shows how deficient the headline is at summarising the situation.
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My apologies for missing it. I thought that was partly if not mostly because of skilled accountants and equally skilled MPs in corporate pockets.
Probably just business as usual as you post. Nothing to see.
edit: A bit dated (2018) but
If so many companies are not turning profits because of R&D or prior losses while operating here, one has to wonder why they persist. The share markets are profit and dividend driven not altruistic. They will be making their dollars somewhere as the accountants attribute the money, or they would be out of business from insufficient return on investment, would they not. It is not as if these ā~$0 profit yearsā are rare, or are they, when similar reports about who pays how much tax seem somewhat similar over time.
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It is indeed
Iāve see the rise and fall of a number of enterprises (companies) over the decades of working for or along side. No need to breech confidentiality even post employment. Iāll just note.
Some companies are built on delivering capital growth, over dividends. The tax system in Australia works to the advantage some would say of this approach. A business has direct access to numerous deductions, offsets and borrowing costs, the average investor can only dream of.
Many such enterprises are built on a gamble on the growth bubble not bursting. The fortunes of several notable Aussie Billionaires in mining owe some success to good luck and timing. Many smaller enterprises borrow heavily, move from private to listed companies, and spectacularly collapse. The gamble of the original owner/s is that they can firstly on sell the going concern before shā¦t happens for a tidy profit, or if not, extract a greater return than investment at risk before said collapse. Occasionally it all comes undone. Even then, as is the circumstance surrounding Ex MP Clive Palmer, survival favours the wealthiest.
Vast sums of money flow trough some enterprises and little tax is collected. I remain in favour of taxing some if not all corporates based on their gross Australian income. It is after all, how the average tax payer is assessed.
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Investors and small businesses have access to the same deductions, offsets and borrowing costsā¦however, many donāt persue these as they often increase risk (and can magnify/increases losses).
Investors can deduct interest payments against investment income, investors can deduct investment management and operating costs from investment income, investors can write off depreciation against the investments etc etc. They are very similar in most regards.
Taxing gross rather than net income is a disincentive to growth of income and employment in a business and would potentially cause significant increase in CPIā¦as those businesses who go into the red as a result of a gross income tax will increase prices (and/or, reduce staff levels) to find other ways to maintain profitability.
No, personal income tax is based on net income not gross income. The net is after all deductions have been removed from the gross income.
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Perhaps @mark_m should have used the term āaverage punterā? As for the argument about āinvestorsā it is a matter of scale and how many specialist tax accountants and lawyers one has to how successful one can be in using the ātoolsā available. One with a mere $1 million could not be reasonably compared with a $100 billion corporate entity in their ability to āpartakeā.
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I get what you are saying. Iām not going to pretend that I know for certain that all 710 companies have uncreative accounts but equally it is not fair to tar all 710 companies with the implied label of dodginess without taking the time to examine the accounts in detail.
The real question - and this is sorely lacking from the ATOās report and data - is whether the ATO itself sees any problem with any of the accounts. I understand that the ATO is bound by condidentiality to some extent but the overall vibe from the article is that the ATO is happy with the situation. So there canāt be too much creative accounting going on.
Ten companies pay 45% of all corporate tax in Australia
The corresponding note is in this yearās report too.
Australia has a small number of very large companies, who do indeed do most of the heavy lifting - so there is a fairly narrow base. For example, for FY18 Australiaās much maligned Big 4 Banks paid $11.9 billion in tax, which is a substantial proportion of the total reported in this yearās ATO Corporate tax report. (I expect that that will be lower in coming years as the direct and indirect costs of the Royal Commission bite, and then people will no doubt complain that the Banks are failing to do their fair share of lifting.)
Missing from the Guardian article is how Australiaās corporate base differs from other (comparable) countries. Are we narrower?
To show how lame media coverage is of this issue:
Civil society groups say it is a clear sign the tax system needs an overhaul. Oxfam Australia has pointed out that [ā¦] Adani [ā¦] have not paid a cent of corporate tax since 2014-15.
You think? A company spends billions of dollars up front for a rail line and for a coal mine that isnāt operating yet and they arenāt paying any tax. (For the avoidance of doubt, I hoped and hope that this mine never does open but you canāt expect a project at this stage to be paying tax, and the large up front costs will mean that it will be able to make an operating profit for some years before paying tax. It is reportedly a 60 year project.)
No. Low RoI will never cause them to be shut down and it will not necessarily cause them to shut down voluntarily. They are shut down involuntarily when liabilities exceed assets.
One of the complexities of the ATO Corporate tax report is that the criteria for inclusion of a company have been decided arbitrarily and are such that companies shutting down is hidden i.e. if a company does shut down then it automatically drops out of the report (so it is then invisible). The report itself notes that.
I would like to see the ABC āFact Checkā its own article. LOL.
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Not per se, but it is an invitation to corporate raiders because of their low share prices and the opportunities presented.
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It does seem an odd statement. Adani donāt have any operations (yet) to generate income let alone a profit. What do civil society groups expect that everyone pays taxes even if one doesnāt generate an incomeā¦silly me, thatās call a GST. What a minute, Adani would have paid GST on the services and goods (as well as PAYG for its Australian employees) so the civil society groups may not be correct in their inference that Adani has avoided paying taxes.
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