One in four of Australia’s largest companies paid no tax last year, but many are tearing through their losses, setting up a multibillion-dollar windfall for the Morrison government ahead of an election-year budget.
The new tax transparency figures, released by the Australian Tax Office on Thursday, show the Commonwealth Bank is the nation’s largest taxpayer with $3.9 billion handed over in 2016-17. But digital behemoth Atlassian and energy giant Origin paid no company tax at all as they offset their bill through losses and tax concessions.
A crackdown on internet companies Google, Facebook, Microsoft and other e-commerce firms has already netted the budget more than $1 billion, as the digital titans get their books in order under new Australian multinational anti-avoidance laws.
The Tax Office estimated the tax gap – the difference between the tax that should have been collected but wasn’t – fell to 4.4 per cent or $1.8 billion, due to “differences in the interpretation of complex areas of tax laws”. “We are all over these companies,” Australian Tax Office second commissioner Jeremy Hirschhorn said in a briefing on Thursday, without naming those who had been targetted. “The number of very large companies that are in the highest risk box is less than 10. They are a small rump that get a lot of love and attention.”
On average, companies included in the report paid tax at the rate of 24.5 per cent, if they had all paid the 30 per cent corporate tax rate, the additional $10 billion would have paid for 10,583,541 emergency patients and 829,224 secondary school students, according to the Australian Council of Trade Unions. Treasurer Josh Frydenberg issued a warning to the handful of companies accused of shirking their tax obligations, as the fourth year of the transparency scheme shames companies into compliance.
“Ensuring corporate taxpayers pay their fair share of tax helps us to provide tax relief for individuals and small and family businesses, and the essential services that Australians rely on,” he said. The Tax Office’s transparency net captures all companies with a turnover of more than $100 million. The 2109 companies paid $45.7 billion in tax in 2016-17, a 20 per cent or $7.5 billion jump on the previous year.
Four of the five largest corporate taxpayers – CBA, BHP, Westpac and ANZ – handed over an extra $3.4 billion compared to 2015-16. Companies with income of more than $5 billion represent only 2 per cent of the corporate transparency population, but were liable for 57 per cent or $26 billion of the tax paid. Mining, financial institutions and energy companies drove the tax take. The under-fire banking sector coughed up an extra $972 million alone last year.
“The big banks pay an extraordinary amount of tax,” said Mr Hirschhorn. Mining added an extra $5.7 billion on the back of soaring commodity prices with coal companies recovering from several years of poor conditions. The number of ASX100 companies that reported a net-loss sunk to its lowest level in a decade, with fewer than 5 per cent not paying tax in 2016-17. The Tax Office report found while the majority of entities in the corporate transparency population made profits and paid tax there were some large entities that did not.
Neither Sydney Airport nor Transurban have paid tax since 2013-14 despite reporting billions of dollars in income. Domino’s pizza paid only 19 per cent tax, 11 per cent short of the 30 per cent company tax rate. For the second successive year transport company Toll paid no tax despite declaring income of more than $5 billion. Foxtel reported an income of $2 billion but only $4.1 million of taxable income.
The Tax Office said sensitivity to economic conditions, reinvestment back into the business, distribution of profits to other entities, tax deductions and tax offsets can all affect the amount of taxable income and tax payable.
Oil and gas giants paid $946 million in Petroleum Resource Rent Tax, up from $845 million the previous year, but down from $1.8 billion in 2013-14 after losses and investments were carried forward. The figure is still a fraction of the $26.6 billion earned by Qatar through its royalty scheme.
Mr Hirschhorn said the e-commerce sector, which includes Apple, Microsoft, Google and Facebook had gone through some “behavioural changes” in response to the introduction of the multinational anti-avoidance laws. “Their previous model was to sell from here but bill from overseas,” he said. “Now they sell and bill from Australia.” The change has meant an extra $7 billion in sales per year have been booked locally.
Of the tech giants, Google paid the lowest effective tax rate of 19 per cent on its taxable income of $73 million. Apple, Microsoft and Facebook all paid 30 per cent. Mr Hirschhorn said the Tax Office’s number one focus going forward was the migration of intellectual property overseas for tax breaks. “We have a laser-like focus on transfer mis-pricing,” he said.