The corporate tax rate is dropping, but which companies are paying less and who pay the most? Where does the corporate tax burden fall?
Accounts for the 32 companies that account for 75% of corporate tax receipts reveal the tax overall across the group is about 24% of profits, despite tax the majority of these companies pay out to foreign governments.
Nine of the 32 companies were Australian-owned, and 10 had Australian-based owners, which included Apple, Google, and Uber. Ten of the 32 firms had global bases, and therefore paid minimal tax in Australia, although they paid little tax anywhere else in the world.
The tax burden comes mainly from companies like Apple, Google and eBay paying little tax in Australia.
They have very slim profit margins, and none of them even made any profit, in Australia or anywhere else, in 2015-16.
In comparison, Telstra, which is the only public listed company that pays profit tax, had a profit margin of about 30%.
Telstra paid about $500m in tax in 2015-16, a 3.7% tax rate, compared to a corporate tax rate of 25%.
While the corporate tax rate is being reduced, tax in a company is changing too.
All of the companies know they’re likely to pay less tax going forward, as companies compete to attract new customers, customers will, in turn, want cheaper prices.
This encourages companies to avoid taxes.
Most of the 32 companies operate in the digital sector, where costs are reduced through automation, including in the way employees are paid.
This is a perfect example of why paying tax shouldn’t be an altruistic act, but a strategy.
Tax avoidance schemes aimed at minimising the amount of taxes they pay
Companies like Apple, Google and eBay are fighting a global battle against tax avoidance schemes designed to minimise the amount of taxes they pay.
The OECD released their own report last year proposing a more aggressive tax plan and the Organisation for Economic Co-operation and Development is currently reviewing the recommendations.
Ahead of the review, they are already looking into taxing digital companies via asset tax systems that have been used by countries such as Brazil and China.
The Australian government also says it will tax multinationals that have financial operations in Australia and aren’t taxed locally.
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It is working on legislation, but there is a lack of clarity on what that would look like.
At the moment, companies such as Apple pay little tax in Australia.
To get a clue of how much tax Apple pays in Australia, the company has told the tax office that it pays the average of 12.5% of its global pre-tax profit through payments to third parties.
But Apple has also been processing overseas sales through local subsidiaries.
From 2010 to 2013, its Australia-based subsidiaries contributed about $3.9bn to Apple’s operations worldwide.
Apple makes an argument that if it is not taxed here, then it would be unable to invest in other parts of the world.
In 2015-16, the revenue of its Australian-based subsidiaries represented about 4% of the worldwide revenue.
It says this is so it will have some money to invest here, and that it will be better able to make decisions about where it makes future investments in other parts of the world.