Fossil fuel giants and other foreign multinationals are again the biggest tax dodgers in Australia. Callum Foote and Michael West unveil the un-prestigious Michael West Media Top 40 Tax Dodgers awards.
Once again, we find fossil fuels multinationals are the biggest culprits in tax dodging in Australia, indeed across the multinationals sector in general, and once again, coming home with the gong for 2023 is US oil and gas major Exxon.
This month, the Tax Office released its ninth annual corporate tax transparency report. The sample size – now 9 years of data – is more than enough to illustrate the failures of the corporate tax system – the indefinite ‘banking’ of tax losses and the mass ‘offshoring’ of profits via debt and IP and service payments to foreign associates.
The Big Four firms EY, Deloitte, PwC and KPMG are the auditors and tax advisers to the vast majority of multinationals and the orchestrators of tax schemes.
The ATO report contains the revenues (total income), profits (taxable income) and tax payable by any corporate entity with a total income of at least $100 million.
From this data, MWM applies a simple formula to find the biggest tax dodgers of the lot and much like in previous years we see mining, fossil fuel and transport companies taking the top spots.
The methodology has been tweaked slightly from previous years but it is largely the same, designed to show which companies are most aggressive both in paying little or no tax on their profits (or more precisely: taxable income), but also in deliberately wiping out their profits in Australia (offshoring it to low tax jurisdictions) because, if you don’t make a profit in Australia, you don’t pay tax in Australia.
Exxon still leads the way
This year, we at MWM were expecting US oil and gas giant Exxon to near the $100B revenue mark without paying a single cent in tax. It came very close.
Yet while the oil giant recorded revenue of $15.5B in the 2022 financial year, it missed out on the $100B number by just over $2B, maintaining its unblemished record of paying not a single cent of tax.
This is while globally reporting a profit of $56B in a historic high for any Western oil or gas company. Pity they couldn’t manage to turn a profit in Australia, oh well there’s always next year. In fact the ATO figures are a year old and company releases show ExxonMobil Australia, perhaps shamed by its war profiteering and the sheer scale of its tax avoidance in Australia, has finally begun to pay income tax in Australia.
Toll Holdings, the Australian subsidiary of Japanese transportation, warehousing and logistics company, finished in the runner up spot as previous silver medalist Lendlease actually paid $66 million to the ATO, its highest-ever contribution. It remains in negotiations with the Tax Office over its $1b retirement village rort executed with the help of PwC and KPMG.
While Toll’s tax payments, $92m, blow the rest of the Top 40 out of the water, the group’s ability to reduce the percentage of their revenue which is translated into profit to less than 1% earns them the number 2 on our 2023 leaderboard.
The Hope Downs Marketing Company, a joint venture between Gina Rinehart’s Hancock Prospecting group and Rio Tinto, which runs four large open pit mines in the Pilbara, landed in the number 3 spot. Although it should be said that this is a “pass-through” vehicle and Rinehart’s Hancock Prospecting and Rio are two of the biggest taxpayers in Australia along with Andrew Forrest’s Fortescue and the Big Four banks (and only eclipsed by BHP, which paid a monte last year).
Again, this is on-trend as Australian multinationals enjoy less scope to avoid paying income tax in this country and the Big Four banks are domestic operations largely.
How do they do it?
How do they do it? They make their profits elsewhere, siphoning out the cash from their Australian businesses in company loans from entities overseas, in IP and service payments, in returns of capital, and by generally adding as many costs as they can to their Australian entities from their overseas entities.
The schism between the corporate rich and the working poor has never been so deep. On the average teacher’s salary, for instance, at $85,000 a year as a PAYG taxpayer, you can expect to pay 23.3% tax on your income or $19,792. That’s $19,792 more than Exxon paid on its staggering sales of $97.9bn from exporting oil and gas.
The average Australian can’t set up hundreds of foreign companies to sell things to themselves in other countries, things like loans. We only have one rule, pay tax at the designated rate on your Australian income. No loopholes, and no dubious expenses to offshore profits to a tax haven.
We have Virgin Australia coming in at number four again, with $42B in revenue, less than a million in profit and nothing in tax. Qantas too pays very little tax except in rare years of super profits when it has expended its tax losses. Yet it has recorded enough taxable income to stay off the MWM Top 40 due to methodology – although earning far more at the top line than Virgin.
Qantas posted a $9.3B revenue and zero profit for 2022 but having paid $270M in tax over the last nine years doesn’t make the Top 40 cut.
Then comes gas producer Santos, which has made $36B since the Australian Tax Office (ATO) began its corporate tax transparency register in 2014 paying just $3.1M in tax, the same as last year, despite its $5b in revenue. To be fair, they have racked up billions in bona fide losses from the LNG debacle.
Also featuring in the top 10 is British tax avoider Vodafone which wails loudly at being called a tax cheat but which is famously just that, supposedly they are still feasting on the massive tax losses of a “start-up”, a very old start-up these days.
BG, or British Gas, makes its appearance in the top 10 jumping up from number 13 last year, with a $31B revenue over the reporting period and no profit made. This is owned by oil major Shell.
Coal companies Yancoal and Peabody make the charts again.
Top 40 Methodology
Similar to previous years, we have aggregated the corporate tax transparency data provided by the ATO to show to total amount of income, taxable income and tax payable for the largest companies operating in Australia.
From this, we have selected companies that have managed to produce taxable income (pre-tax profit) that is less than 1% of their total income.