Introductory comments: Sun Herald Editorial Nov 14, 1999:
Tax dodgers a fair target:
Who costs the country more: a tax dodger or a welfare bludger? Despite the fact that the bludger probably earns more disapproving headlines, we pay a far bigger price for the rorts of the rich aganist the taxation system....
Now read on about Mr no-tax Packer...
by Ian McIlwraith, Herald Sun, 10th November 1999
Kerry Packer is fast earning a reputations as Australia's answer to Houdini when it comes to tax.
Whenever it seems Australia's richest man is liable to fork out a few million to the Australian Taxation Office, it never seems to happen.
Consolidated Press Holdings, the private company ultimately controlled by Mr Packer through a chain of local and overseas registered companies, has just posted a Au$1.25 billion profit for the 12 months to June 30 this year.
And it gets to keep it all - except $80 million or so in dividends paid to other companies of Mr Packer.
For the majority of people, the Pay As You Earn tax system means that our contributions to the ATO is levied before we even see the money.
And we still have to do a tax return to make sure we haven't been earning more money, like that $3.65 in interest on your savings accounts which the ATO also wants a slice of.
As Ray Regan of the National Tax and Accountants Association says, the average adult full-time salary is now $43,000 a year, which means that in a decade or so, the average earner will be on the top tax bracket and liable for GST on the balance.
Yet those earning vastly more seem to more able to minimise their tax liabilities.
Mr Regan says the system can be manipulated by people who can afford the best tax planners in the country.
Let's just take a minute to put the CPH point in perspective. It represents an earning rate of about Au$3.5 million every day - or $200 in the time it takes you to read this sentence.
Australia's four major banks have in the past year earned Au$7.18 billion - although that was after paying tax.
So, Mr Packer's private company is making money on a par with the likes of the Commonwealth and National Australia Banks - banks which have hundreds of shopfronts that we use every day.
CPH we see less of, although it does own 40% of Crown Casino, Channel Nine, and magazines like Australian Women's Weekly and Woman's Day through the public company Publishing and Broadcasting Limited.
Directly, CPH is also the owner of Hoyts group after a takeover worth more than $600 million this year. Yet it lists its major activities as "investment".
On the face of it, most people would assume Mr Packer's company CPH owed the ATO about $450 million based on the general company tax rate of 36%.
And CPH's accounts show it did have the notional liability, only it had ready-made excuses not to have to pay.
Unlike most companies CPH does not have conventional sales revenue. Instead almost all or $1.32 billion of its annual income of the $1.59 billion came in the form of dividends.
Many Australians are learning about dividends and tax as a result of taking up shares in Telstra and other public companies.
When those companies pay tax on their profit, they can give shareholders dividends which the ATO recognises as having had tax on them already paid.
CPH's latest accounts are basically saying that the tax on the dividends it receives has already been accounted for.
Mr Packer's group has, not surprisingly, the very best of tax advice. Sitting on CPH's board is John Cherry, a Sydney tax adviser with accountants Ernst and Young, who has an enviable reputation on the subject built up over three decades of specialisation.
Mr Cherry declined to comment on the CPH accounts, but did have a few things to say about Michael Carmody's'ATO.
Many will remember that the ATO and the Packer group have been warring in court over a corporate restructuring which the tax office claimed was an exercise in avoiding paying Au$260 million.
Mr Packer won when the Federal Court rejected the arguments and the ATO is still trying to get permission to appeal to the High Court.
"I am surprised he's spending taxpayers' money to pursue something the full Federal Court says is not... a tax scheme," Mr Cherry said.
It's not possible to verify whether tax was paid by CPH's subsidiaries before their dividends were paid to the parent because those smaller companies either do not have to file accounts here or are incorporated overseas.
According to one tax expert, the nearly Au$700 million in dividends from one CPH offshoot, Consolidated Press International, could have been money accumulated over a decade, not just one year - but only paid across to the parent this year.
That the ATO may still review the accounts and later decide it should be paying some tax on its profit is a matter of conjecture.
But CPH has been consistent in producing a zero sum tax bill. In 1997, it earned $229 million. Its tax provision was . Its tax provision was zero. In 1998, it made $385 million. Tax provision zero.
Next year?
Some things can, however, be concluded. CPH plainly is not avoiding tax, because that is against the law.
The ATO is determined to make large corporations pay their share of the tax burden.