Palmer’s missing tax: How does the billionaire get away with paying no company tax?
Monday, May 26, 2014/
If the federal government is looking to boost its tax revenue, it might be worth taking a closer look at the company accounts of one of Australia’s richest people: Clive Palmer.
While many small Australian businesses are eagerly awaiting the government’s proposed cut to the company tax rate, reports in The Australian over the weekend indicate three of Palmer’s companies—Mineralogy Group, QNI Resources and QNI Metals—have not paid company tax in the last six financial years.
And according to audited cash flow statements from the companies, the ATO has paid Palmer’s companies a total of $1.66 million since 2008, as well as a once-off payment of $45 million to Mineralogy in September 2013 after Palmer successfully argued his company paid too much capital gains tax on a 2007 iron ore deal.
According to The Australian, the absence of company tax can be explained by a lack of profitability, with the companies’ recording almost $130 million in “deferred tax assets”, which can be used to avoid paying tax if the companies turn a profit in future years.
Professor Chris Evans from the Australian School of Business at the University of New South Wales told SmartCompany it is not unusual for companies to minimise their tax bills.
“For all tax planning, the headline tax rate is a voluntary target and there are so many different ways of manipulating tax affairs within the letter of the law,” says Evans. “It’s actually very easy to reduce the amount of tax you pay.”
Evans says many companies quite legitimately find ways to minimise their tax “within the letter of the law”, but some will “stretch the letter of the law to the nth degree so they are no longer operating within the spirit of the law”.
“And more often than not, the ATO is powerless to do anything,” he says.
Tax minimisation is especially common for companies that operate across geographical borders, says Evans, who points to large multinational corporations such as Google and Apple which are known for shifting their funds and profits between jurisdictions.
“They are trying to find their way between the rules,” he says.
Companies can also shift their profits to other entities within their business to avoid paying tax, says Evans. “So one part of the company may not be profitable, but you might be able to take profit from somewhere else,” he says.
SmartCompany contacted Clive Palmer but did not receive a response prior to publication.