The news that wasn’t fit to print

THERE is no way Rupert Murdoch ripped off the ATO.

A NEWSPAPER which had any sense of its integrity would have published a public withdrawal of and apology for running a story that was so completely false and viciously defamatory as the one on purported company tax avoidance last Monday, splashed across the front pages of the Fairfax Media duo, The Age and the Sydney Morning Herald.

This needed to be an apology directed at both the companies which the Age and the Herald, collectively and individually and without the slightest shred of substantive evidence, falsely accused of massive and sustained tax avoidance; and to their readers for feeding them such provocative and simply untrue nonsense.

Indeed of course, a newspaper which had the most basic level of competence would not have published — far less, triumphantly proclaimed — in the first place a story that was so obviously and embarrassingly wrong.

Anyone who had even the vaguest understanding of tax should have instantly realised the story and the so-called report on which it was based, were quite simply complete and utter rubbish.

Both story and report should have gone straight into the bin, as indeed is exactly what happened at the Fairfax duo’s stablemate, the Australian Financial Review. These days all three Fairfax tabloids shares the supposedly ‘big stories;’ the Fin chose not to share this one.

Yet far from withdrawing the story and publishing an apology, the Age especially ‘doubled-down’ on its incompetence by actually taking credit for the inquiry into ‘tax avoidance’ initiated by the Greens in the Senate — with the Age splashing across its front page “Tax dodgers put on notice.”

Interestingly, the Herald this time did not put that story on its front page. It also treated it more straightforwardly in the context of the Senate inquiry.

All that suggested to me perhaps a certain slow dawning in Sydney that they had been sold a complete crock by an obviously agenda-driven collective of unions and non-profit organisations.

It also put me in mind of the great vexed question to which I doubt we will ever reach a widely agreed answer: which of the two has really wrested the title of Australia’s worst-ever prime minister from the hands of Gough Whitlam: Julia Gillard or Kevin Rudd? Or would it remain an eternal dead-heat, inseparable even by the political equivalent of a photo-finish?

Just maybe, the Herald has now — narrowly — broken a similar tie between it and its southern stablemate.

Now, the report from the union United Voice and the collective of odds and sods, the so-called Tax Justice Network, purported to analyse the effective tax rates of the top 200 companies listed on the ASX over the last ten years, as against the 30 per cent company tax rate.

It purported to find that the average effective tax rate (ETR) of the 200 companies over the ten years was just 23 per cent. It then concluded that the failure to pay 30 per cent had cost tax revenue of an average $8.4 billion a year or a staggering $84 billion in total.

The report — and the guileless Age and Herald — listed the key ways big companies could avoid tax: by routing income through tax havens, by ‘transfer pricing’ with overseas affiliates, and by loading up the local company with debt to get a tax deduction.

So did they then specifically identify the use of these techniques by any — all — of the 200?

Not a bit of it; all the report did was add up the reported pre-tax profits and tax provisions of the 200 over the last ten years, divide the second by the first, and out popped that 23 per cent ETR. And the conclusion of massive tax avoidance.

In the process, both the report’s authors and even more damningly and inexcusably both the reporters and the editors at the Age and Herald ignored all sorts of red lights, flashing: warning, nonsense on stilts as Judy Sloan likes to say.

One of the first graphs in the report shows that companies in Australia pay 24 per cent of all tax paid. Among OECD countries, this is second only to Norway, and is nearly double the OECD average of 13 per cent. And this is DESPITE, as the report notes, our 30 per cent rate being LOWER than the OECD average of 32.5 per cent.

This is hardly suggestive of the corporate sector not paying its share, of engaging in massive avoidance. But rather than see that obvious conclusion, the report argues the high level of tax paid by companies necessitates even greater action against avoidance.

Then, the report detailed official — real — tax figures from the Australian Tax Office (ATO), which show the ETRs broken down by company size. Medium and big companies had an ETR of 26 per cent, small 27 per cent and micro 26 per cent.

Doesn’t that sort of suggest there are perfectly normal reasons, which apply across companies big and small, for an ETR below the statutory 30 per cent?

Or does the report’s authors and the Age and Herald genuinely believe that suburban builders and the local milk bar proprietors are joining the big end of town in channelling their profits through tax havens and ‘transfer pricing’ with nefarious overseas affiliates?

The killer red light though was another table, also from the ATO, which broke profit and tax paid down by industry segments.

Interestingly, very interestingly, one segment and one segment only, had an ETR in 2011-12 HIGHER than the 30 per cent, at 31 per cent? It was “Information media and telecommunications.”

Why interesting? Because that segment is dominated by two companies — Telstra and News Corporation, publisher of course of this paper.

Unless Telstra is selflessly paying something like a 60 per cent tax rate, and of course its figures show nothing of a sort; clearly in the official eyes of the ATO as it counts the money coming in, News Corp must be paying close to its 30 per cent.

Why VERY interesting? Because News Corp is identified by the report and the Age/Herald as paying a tax rate of just 1 per cent. And paying that rate not just in one particular year, but, on average EVERY YEAR of the past ten.

Astonishingly, the report claims and the Age/Herald breathlessly retailed that News Corp (now 21st Century Fox) underpaid an extraordinary $16 billion of tax in total over the ten years — fully 20 per cent of the tax purportedly avoided by the entire 200!

Even more astonishingly, the report just made that figure up. The annual reports of News Corp show that it recorded a total profit of $US36 billion over the ten years and provided $US8.3 billion in tax. That’s an effective tax rate of 23 per cent, somewhat higher than the claimed 1 per cent.

The authors and the Age/Herald seem unaware that News Corp was a US company over the entire ten years; that something like 90 per cent of its business and quite normal profits — and so any tax payments — were in the US.

So even if that completely fictitious figure of $1.6 billion a year was tax really lost, it would have been tax lost to the US internal Revenue Service and not to the ATO, as both the report and they claimed.

This one case showed a spectacular double level of incompetence on the part of the two newspapers.

Apart from the sheer implausibility of the claim that News Corp paid virtually no tax, every year over ten years, if you really believed it and could substantiate the claim, wouldn’t you have splashed it all over your front page?

Rupert Murdoch rips $16 billion from Australian taxpayers!