Charging and trialling sex offenders is Right Charging and trialling Whistle Blowers is a disgrace (ODT)
Newscorp loaned Foxtel $900M with an interest rate of 12%.
A report by Michael West describes Foxtel was spitting cash (highly profitable) at the time of the loan and there was no requirement for the loan.
The interest repayments from Foxtel to News resulted in Foxtel reducing their tax to the ATO to zero, Foxtel generated $6 Billion in revenue over 3 years and paid no tax.
If Foxtel had no requirement for the loan it can be argued that Newscorp, Foxtel and their tax lawyers and accountants conspired to draw up a loan agreement for the sole purpose to defraud the ATO of taxable income.
Mark Freeman’s bright business idea earned him a government grant. But the tax office disagreed and hit him with a huge bill. Seven years and $750,000 later, he is still fighting for justice.
A public servant turned whistleblower employed by the Australian Taxation Office has this morning had his home raided by officers from the ATO and the Australian Federal Police, after speaking with a major joint Four Corners and Fairfax investigation into alleged abuse of power by the tax office.
When Corporate Ddecption is no Exception
Shares in troubled franchisor Retail Food Group have been smashed for the second day in a row after it was revealed the company had a secret deal with a former staff member to manage stores.
RFG’s shares tumbled as much as 13 per cent in early trade on Tuesday after Fairfax Media reported that the listed franchising giant had not told shareholders about the deal between itself and a company run by Alicia Atkinson, RFG’s former bakery cafe director and the partner of RFG’s former longstanding boss Tony Alford.
Australia’s missing $100 bills could be being stockpiled by criminals or those seeking to avoid taxes, an expert says.
Heightened worries: Tax Commissioner Chris Jordan. Photo: Bradley Kanaris
An energy company operating in Australia transferred more than $11 billion to the low-tax jurisdiction of Singapore in a single year, heightening concerns that Australia is being duped by tax-minimising multinationals.
The extraordinary scale of funds being moved out of the country by individual companies is revealed in an internal Australian Tax Office memo, obtained under Freedom of Information.
It lists 10 companies that channelled a combined $31.4 billion from Australia to Singapore in the 2011-2012 financial year.
An estimated $60 billion in so-called “related parties” transactions went from Australia to tax havens in the same year
Tax Commissioner Chris Jordan and a number of his senior colleagues have recently flagged concerns about cross-border transfers and intra-company refinancing and the potential that they are linked to tax avoidance.
The Tax Office is particularly concerned about mining and energy companies extracting Australian minerals which have established “marketing hubs” in Singapore that appear to have little use other than as a destination for shifted profits.
An ATO spokeswoman said the issue was currently under investigation. “I can confirm that we currently have 15 audits of marketing hubs under way with more ready to go,” she said.
Treasurer Joe Hockey is considering the introduction of a so-called “Google tax” but some experts fear the problem of tax avoidance and aggressive minimisation runs far deeper than the tech sector. Fairfax Media revealed this week that the 900 biggest companies in Australia reduced their tax bills by a combined $25 billion via deductions, exemptions and other concessions.
The names of the companies have been redacted in the document, which is correspondence between the Singapore revenue authorities and their counterparts at the ATO, but a push is under way to use the powers of a Senate committee force the names of the multinationals into the public arena.
Hearings of the inquiry into corporate tax avoidance by the Senate economic references committee begin on Wednesday and will include witnesses from multinational miners Glencore and Adani, as well as Google, Apple, Microsoft and News Corp.
Representatives of the big four accountants will also front the hearings as will former Tax Office adviser Martin Lock, whose submission to the inquiry details how “tax planners” engaged by corporations likely cost the public “billions of dollars” in lost revenue. “The difference between judicious ‘tax planning’ and ‘tax avoidance’ is usually blurred,” he said.
The Tax Justice Network and the union United Voice, which co-funded a report that showed the biggest Australian companies pay nowhere near the 30 per cent tax rate, believe the committee has the power to force the Tax Office to reveal the names of the companies moving billions of dollars offshore.
“We understand the committee can make those documents public. Then people could know who the companies are that are shifting billions offshore and it would be up to those companies to explain why,” said the Uniting Church’s Mark Zirnsak, a member of Tax Justice.
David O’Byrne, the national secretary of United Voice, said: “It is inappropriate that one company had $11 billion of related party transactions through Singapore and the Australian people do not know what company that is.
“If companies are claiming $25 billion of tax deductions from Australia’s budget then we at least deserve to know who they are. If they won’t identify themselves then it is up to the Senate committee to reveal them.
“Until the ATO confirms who is responsible for this activity it is a slur on all companies.”
The Tax Office plans to allow large corporations to self-audit. Photo: Michel O’Sullivan
The Australian Tax Office is pushing ahead with a controversial plan to allow the country’s largest corporations to audit their own tax affairs through the corporations own private sector financial statement auditors. The ATO previously performed this tax audit work.
The requirement for financial statement auditors to be totally independent of the management, ownership and operations of a corporation is an essential requirement for the maintenance of integrity and confidence in the Australian financial system.
This particularly applies to publicly-listed corporations. Requirements for auditor independence are enshrined in the Corporations Act, various Australian Accounting Standards and professional and ethical standards set by the accounting bodies.
ASIC and these other bodies have an oversight and regulatory function to monitor and maintain auditor independence. There are also requirements that as part of independence issues, auditors of public corporations are rotated every five years. Auditors of public corporations are required to sign a “Statement of Independence” and this is included in the published Annual Report of a corporation
ATO is now planning to delegate to the private sector financial statement auditors of a corporation the audit of the tax practices and operations of the corporation. To a very large extent this plan by the ATO is relying on the professional independence of the financial auditors of the major corporations.
While this reasoning and justification by the ATO is tenuous at best, and wonderful in theory, the “real world” practical commercial reality is that in many major corporations, the external financial statement auditors cannot reasonably be perceived as being totally independent of the policies, operations and management of the corporation they are auditing.
Some major corporations do have as part of their corporate governance policies a criteria that the sole relationship with their external auditors and accountants is the financial audit function, and nothing else. Unfortunately many large corporations do not adopt this policy.
Take for example the matter of Crown Resorts Ltd (Crown), a major publicly-listed corporation under the James Packer umbrella. Other similar examples can be given to the Crown situation set out below. From their published accounts, in the five years to June 2014, Crown earned pre-tax profits of some $2.6 billion. Of this profit, Crown provided for $415m of income tax expense, and has (from their cash flow statements) physically paid $397 million in income tax. This represents an effective tax rate of around 15%-16%, against the legislated rate of company tax of 30%.
Ernst & Young Australia (EY) are one of the “big 4” accounting firms in Australia, and have been the auditors of Crown since at least 2007. In the same five-year period to June 2014, and again extracted from the publicly available financial statements, Crown paid EY the amount of $4m in financial audit fees, plus a further $21m in tax service fees. Additionally, the international arm of EY in the same period received audit fees of $432k, and also derived $1.3 million in tax service fees, plus another $260k in other consulting fees.
Put bluntly, from a purely common sense perspective, EY as financial auditors of Crown cannot reasonably be perceived as being professionally or financially independent and disinterested in the tax practices and policies of Crown.
Are we now to have EY, at the behest of the ATO, enquire into and express an “independent” audit opinion on the tax practices and operations of Crown, when EY can only reasonably be perceived as being very substantially the origin and author of the very same tax practices and operations adopted by Crown?
The plan by the ATO is commercially and logically absurd. The fox is in charge of the henhouse.
The above comments should not necessarily be seen as a criticism of the ATO. The government, in their infinite wisdom,havecut or is are cutting some 4700 jobs from the ATO. The government have deliberately and effectively emasculated the ATO to the extent that they no longer have the resources to perform their own taxation audits on corporations such as the above example of Crown. The plan by the ATO almost appears as an act of desperation by the ATO given the gutting of their staff resources by the government.
It also appears from the above example that the various regulatory and oversight bodies, both public (ASIC and the Accounting Standards Board) and the private professional bodies (Chartered Accountants Australia) may well be asleep at the wheel on these issues.
The winners in this imbroglio, as usual, will be the current government’s “mates” – the big end of town – the big corporates, and the big four accounting firms. The losers are obvious – the public purse and the average guy in the street who have PAYG deducted from their wages and salaries. As the old saying goes – the poor pay their taxes and the rich pay their accountants and lawyers.
Perhaps in the interests of fairness and equity, the ATO will also allow every taxpayer in Australia to audit their own tax affairs – this makes as much commercial and logical sense as the ATO plan for large corporations to audit their own tax affairs.
Rob King is a former chartered accountant, now semi retired and performing financial analysis of public interest matters.