Throughout the COVID-19 crisis, various vested interests have been lobbying for the reforms they’d like governments to deliver under the guise of economic stimulus. The Minerals Council of Australia (MCA) is no exception. Last week, the MCA published a list of “immediate reform priorities to accelerate economic recovery”. Along with its usual wishlist of industrial relation reforms, and incentives for exploration, MCA CEO Tania Constable declared that “Australia’s company tax rate of 30% is too high and not internationally competitive”.
This is hardly a new idea from the MCA, of course. This is just the latest manifestation of a campaign the MCA rehashes every 6 or 12 months. Last month, former Senator and current MCA Chair Helen Coonan said, “Australia’s company tax rate is 3% higher than the G20 average and the second highest in the developed world”. Rinse and repeat.
While it’s unsurprising that the MCA is attempting to use the COVID-19 crisis to its members’ advantage, the tax record of its members is worth delving into. The Australasian Centre for Corporate Responsibility (ACCR) collated the company tax paid by all known subsidiaries of the MCA’s ten largest member companies over five years between 2013/14 and 2017/18. While the MCA leadership likes to claim its members are overburdened by tax, the data tells another story.
View the full dataset here.
Of the 33 subsidiaries assessed, the aggregated marginal tax rate was just 18.8% over five years, and just 18.1% in 2017/18. While the MCA claims that the marginal tax rate in Australia, at 28.4%, is higher than the G20 average, MCA members paid a marginal rate 7.4% belowthe G20 average.
The number of subsidiaries paying little or no tax is staggering. Twelve of the 33 subsidiaries assessed paid little or no company tax over five years. Fifteen of them paid little or no tax in 2017/18. The perennial tax avoiders include Glencore, Peabody Energy, Whitehaven Coal and Yancoal.
Eight Glencore companies paid a marginal tax rate of just 11.2% on profits of $5.2 billion over five years. Glencore’s largest subsidiary, Glencore Investment Pty Ltd, paid a marginal tax rate of just 6.2% on revenue of $58.5 billion and profits of $3.8 billion over five years. By comparison, one BHP Group subsidiary, BHP Billiton Ltd, earned three times as much in revenue, $174.8 billion, but paid 57 times more in company tax.
While three Peabody companies paid a marginal tax rate of 29.1% on profits of $311 million over five years, its largest subsidiary, Peabody Australia Holdco Pty Ltd, made no profit on revenue of $16.6 billion over five years, and therefore paid no company tax.
Similarly, Whitehaven Coal has not made a profit on $8.4 billion revenue over five years. It hasn’t paid any company tax either.
Mining companies are well known for reducing paper profits through transfer pricing and loading up local subsidiaries with debt, but they can also reduce the tax payable on taxable income through allowances such as asset depreciation, and research and development.
While BHP Group and Rio Tinto do pay sizable amounts in company tax, the marginal tax rates paid by both companies are starkly different. Both generated similar revenue of $209-210 billion over five years. Rio Tinto was nominally more profitable, but BHP companies paid a much higher marginal tax rate of 23.4%, compared to Rio Tinto’s 15.2%.
The ATO data shows that few if any MCA members pay anywhere close to the nominal company tax rate of 30%. Their social license is built on exaggerated claims and hefty advertising campaigns about their ‘contribution to society’, while they knowingly minimise their company tax obligations, year in, year out.
Putting aside the methods used to reduce their taxable income, if the nominal tax rate of 30% was applied to all profits from the 33 subsidiaries, it would have generated an additional $19 billion in tax revenue over the last five years. And that’s certainly money Australia could use right now.
This latest campaign by the MCA to reduce the company tax rate would be laughable if it weren’t so damaging. At a time when the federal government is borrowing heavily to fund the economic recovery from the COVID-19 crisis, MCA members are turning their backs on ordinary Australians.
This article by Dan Gocher first appeared on Michael West Media.