Australia’s most egregious corporate tax avoiders have had a hammering this year, deservedly, via the Top 40 Tax Dodgers countdown.
If the likes of Exxon and EnergyAustralia – ranked first and second on the MW Top 40 Tax Dodgers chart are the heaviest ‘leaners’ – who are the nation’s heavy lifters?
It’s also fitting to recognise those companies who contribute most to the society in which they operate.
We are publishing two lists here, two top 40s: the Tax Heroes and the Biggest Taxpayers. Heading up the Biggest list are the big four banks, the supermarket duo, BHP, Telstra and Rio Tinto.
These are the biggest taxpayers by virtue of their sheer size, but they are not the best if you consider the size of their income.
We have done some calculations, therefore, around the 2000 biggest companies in Australia to work out which ones did the least to minimise their taxable income and did the most to contribute to the tax base.
Topping the list of Tax Heroes again this year is Kerr Neilson’s Platinum Asset Management. Rising to second place we have the ASX and then Magellan Financial Services in third. There are some interesting things to consider.
There is an element of good fortune, not just good nature, in these rankings. Being a good taxpayer is about being in the right sector at the right time in history.
There are no low-margin businesses in the table above; just well-run financial services businesses and miners whose assets are in a mature stage and spitting out plenty of cash.
This is a super high-margin business, in part because of what it does – invests other people’s money – but it also comes down to Platinum’s investment performance and reputation over the years.
There are very few businesses that can produce a profit of $1 billion on $1.36 billion of revenue. That’s a margin of 78 per cent. If you look at the table below of the top taxpayers, the big banks’ margins are still nice and chunky, at 25 to 30 per cent.
But Woolworths and Wesfarmers (which owns Coles) have margins of just over 5 per cent, meaning they soak up 95c in the dollar in costs to run the business.
These are huge-volume businesses that only get to keep a fraction of the revenue they make.
Among other patterns in the data:
- As with the Top 40 Tax Dodgers, more than 95 per cent of these companies are audited by Big Four global accounting firms EY, PwC, KPMG and Deloitte
- The Big Four, despite their fabulous profitability, are absent from the heroes list. They are housed in arcane partnership vehicles and so don’t have to report
- There are not many foreign-controlled multinationals on the lists, indicative of the general global trend for multinationals to be more aggressive in their tax practices away from home
- The Heroes list is well represented in financial services thanks to high margins. Such as Platinum, Magellan, ASX, Perpetual, Argo, UBS, Credit Agricole, Credit Corp and Future Fund
- Internet stocks domiciled in Australia, Carsales.com.au, Realestate.com.au and Seek make the Heroes list, which demonstrates some new-economy stocks are making a contribution
- In contrast, the Australian offshoots of global tech giants Apple, Google, Booking.com and Amazon appear on neither list despite the billions of dollars they make from their Australian operations
- Most of the companies on these good taxpayer lists file General Purpose financial statements, rather than the inadequate Special Purpose accounts typical of the Top 40 Tax Dodgers
For all their sins – the rampant, systemic fraud exposed by the banking royal commission – the banks are the biggest taxpayers in the country.
Commonwealth Bank is Australia’s biggest taxpayer.
According to the four years of Australian Tax Office transparency data, the CBA showed tax payable of $13.2 billion.
Interestingly, as close observers of the franking credits debate will have noticed, not all of this $13.2 billion goes to the government to pay for defence, infrastructure, the public service and so forth.
The amount that goes to the national coffers excludes these franking credit payments, which go to those who have reduced their taxable income. Billions of dollars therefore in tax payments do not end up in the tax base.
To the sectors
Although there are some notorious dodgers in the resources sector, such as the oil and gas majors and Glencore, some mining companies make a large contribution. Gina Rinehart’s Hancock Prospecting comes in at #12 on the Heroes chart, with $1.4 billion payable over four years, and Rio’s partner Robe River, Nippon Steel and Baosteel also appear.
Ramsay Health Care turns up in the Biggest rankings, while Healthscope appears on the Dodgers. Likewise Allianz and QBE, the insurers on the Biggest, while Swiss Re and Hannover Life are on the Dodgers list. Again, Toyota is on the biggest, but a slew of other carmakers feature among the Dodgers.
UBS, Citibank, OCB and Bank of China are on the Heroes, while Goldman Sachs paid not one red cent over four years and joined BNP Paribas and ING on the Dodgers.
Another feature of the contrasting lists is companies who require more a social licence to operate, tend to pay more tax. Hence tobacco companies, British American Tobacco features on the Heroes, and Phillip Morris on the Biggest list.
The ASX, which is a virtual monopoly ranks #3 on the Heroes chart, while the local banks, which enjoy taxpayer protection – a bail-out fund – rank highly on the Biggest table.