Tag: Tax Evasion

A bunch of shifting bastards: how Big Tech goes small on tax – Michael West

Microsoft, tax avoidance

How do multinationals like Microsoft get away with paying so little tax? They deliberately wipe out their profits in high-tax countries such as Australia. Callum Foote reports on the global tax avoidance structure of the tech giant.

Source: A bunch of shifting bastards: how Big Tech goes small on tax – Michael West

Netflix: What’s the Scam? – Michael West

Netflix: What’s the Scam?

Netflix Australia has produced a brilliant fantasy. Suspend disbelief now! Netflix claims it made a loss in Australia last year, in the year of Covid when we were locked down watching too much Netflix. You can watch this latest Netflix fantasy for just $41, the price of its financial statements from the corporate regulator ASIC. What’s the scam? Netflix’s 2020 fantasy accounts show revenue in Australia of just $20.5m. If you assume their 12m subscribers here pay a basic rate of $10 a month, that’s $1.4bn in revenue. So what happened to this $1.4bn? Netflix and its co-conspirator EY are “doing a Google”, that is, the caper Google used to rely on to pay zero tax before it was forced to resort to another scam. They just book their income here to an associate offshore and the minuscule amount of income they book here is “service” fees from Netflix in the Netherlands and the US. Tax seeped in at just $581k. They claim they actually turned cashflow negative in the year of Covid.

Source: Netflix: What’s the Scam? – Michael West

Top 1% fails to report over 20% of income using potentially “criminal” tactics: IRS analysis | Salon.com

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Why would anyone believe Trump wasn’t one?

The wealthiest 1% of Americans fail to report more than 20% of their income to the IRS, and some of those ultra-rich people use “sophisticated evasion technologies” and criminal tactics to avoid paying their full share, according to a new analysis by researchers at the IRS and economists. The analysis estimated that the top 1% of households fail to report 21% of their income. Nearly a third of that is through sophisticated schemes that random IRS audits fail to detect. The trend is even starker among the top 0.1% of earners, whose unreported income may be twice as high as the IRS estimates.

Top 1% fails to report over 20% of income using potentially “criminal” tactics: IRS analysis | Salon.com

ATO puts the fox in charge of the henhouse: Why is there a Lentils as Any thing model ok for corporations but not Labour. Why is there trust and belief in the “trickle Down effect for oneside but policing of the other. HSBC< CBA< Maquarie have all shown to be criminal not citizens on mass.

The Tax Office plans to allow large corporations to self-audit.

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.

We are the labour of this country and pay 65% -70% directly and indirectly in Tax. Why is Capital allowed to avoid it?? Name and Shame

<i>Illustration: michaelmucci.com</i>

Tax office not doing punters any favours

Date
October 4, 2014 – 12:58AM
Michael West

Read more: http://www.smh.com.au/business/tax-office-not-doing-punters-any-favours-20141003-10px8i.html#ixzz3F9fmtUDk

Heartening to see somebody in Canberra looking after the broader interests of the nation as opposed to the distracting burqa fluff.

Greens leader Christine Milne managed to get two vital senate inquiries going: one into tax evasion by corporations and the other into the “gold plating” of electricity networks, which has been the main driver of rising energy bills.

Inquiry is into corporate tax “evasion” rather than “avoidance”. Avoidance is the legal one, evasion illegal.

The silence from the business lobby has been chilling. All taxpayer segments are being encouraged to deal with the ATO online and – if the ATO’s data analysis indicates that individuals and small business are compliant – they’ll rarely be bothered by the ATO in the future (a ‘light touch’ approach).”

Much is made of the “need to collaborate internationally” to pursue tax reform. No surprise there. They know the G20 efforts to curb tax avoidance should amount to nothing.

No surprise either that the ATO’s “new approach” is lauded by tax professionals.

Were there a peak body for Katie Perry fans, they might steal the institute’s motto nec timens nec favens (without fear or favour). Andrew Bolt stole this for the end of his Bolt Report

Avoidance only becomes evasion if the authorities drag you off to court and win. If they force a settlement, it is secret. So when a company pays little or no tax while claiming it obeys the law, it is likely that the law has simply not been tested.

It was terrific to see Wesfarmers’ chief executive Richard Goyder and Harvey Norman chairman Gerry Harvey speak on the subject this week.

“My personal view is that the tax issue will become a bigger one for companies, and will go directly to their reputation.  Norman already operates in Ireland and Singapore, it would be easy for him to dodge tax.

Others such as the head of Google Australia, Maile Carnegie, have decried the media “naming and shaming” corporations on tax. Sadly, naming and shaming is the only thing which works. Without naming and shaming, there would have been no parliamentary inquiry.

In the extraordinary lengths to which they go to avoid tax, aided and abetted by government, Facebook provides a classic case. Although it has a market value of $US200 billion ($228 billion) and sales of $US10 billion-plus, Facebook managed to win an exemption from the corporate regulator in order to class itself as – to quote the exemption, “a small pty company controlled by a foreign coy which is not part of large group”.

What part of $200 billion is not large? The point is that it did that to skive out of having to file consolidated financial statements in which it would have to provide greater disclosures on tax and transactions with its associates offshore.

The failure of transparency and proper disclosure had made it open season for big tax avoiders in this country. We don’t need G20. What we need is more corporate leadership in the mould of Goyder and Harvey and some spine from our political leaders.

Thoughts that need expression
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