The Black Box

Karl FitzgeraldMultimedia2 Comments

Renegade Economists Show

As broadcast on the 3CR airwaves 5.30 – 6pm Wednesdays.
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Show Notes
Roman Lanis (Assoc Prof Accounting, UTS) discusses tax evasion strategies by oil companies undermining one of our ‘most efficient’ taxes.

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Related Links
Secret ASIC list for grandfathered insiders
Roman on PRRT tax evasion
Roman on:
Westfield’s Tax Avoidance
REIT tax avoidance:

… our report, commissioned by union United Voice suggests the Westfield Group effectively paid just 8% tax in the seven years to 2013, and its property arm, Westfield Retail Trust (WRT), no tax at all.

This is due to extensive use by the both the Westfield Group and Westfield Retail Trust of trust structures known as Real Estate Investment Trusts (REITs), which it has combined with stapled securities.

The accounting trick that helps multinationals avoid paying tax:

However, in preparing its financial report Chevron Australia applies the Reduced Disclosure Requirements (RDR) which is allowed under the Australian accounting standards.

The RDR allows large proprietary companies that do not have public accountability to voluntarily apply the disclosure requirements of just a few accounting standards. Applying the RDR relies on the idea that the only companies which have such accountability are those which issue publicly tradeable equity or debt securities.

The consequences of allowing large proprietary companies such as Chevron Australia (and almost every other subsidiary of a multinational operating in Australia) to use RDR are enormous in terms of transparency. The ATO, in the past, has indicated that it relies on the annual reports of companies for related party disclosures in identifying tax avoidance.

Non-disclosure of this information by large proprietary companies makes it difficult for the ATO and anyone else in Australia to identify tax avoidance.

My big report, the Total Resource Rents of Australia found:

Accounting practices turned the PRRT’s 40% into an effective 3.2% rate when comparing resource rent revenues to profits for the two Australian companies ($174m/$5.5bn).

Glossary

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2 Comments on “The Black Box”

  1. Hang in there old bean. I too despair things will ever change. Self interest of the wealthy and powerful seems to reign supreme and the poor majority in the world seem so easily persuaded to act against there own interest. Mediocrity and rent seeking is rewarded while innovation and creativity thwarted. Perhaps…just perhaps somewhere a more dynamic system will arise which is so vital it will inspire others to sweep the lazy and entitled away. You know the Coke brothers believe they are Gods gift to humanity… I’m sure all the Robber Barons felt assured that they deserved their place at the pinnacle. The dream is that one day such people will be forced to eat their own hypocrisy.

  2. Thanks Adam, I appreciate the sentiment! We certainly are playing the long game, but at least all our key metrics are up, so we are getting somewhere. The system you talk of is one that harnesses the Power of Monopoly for the common good, as outlined in my Total Resource Rents of Australia report.

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