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February 20th 2018 print

Emma Alberici with Roger Franklin

Vampire Squids and Blood Funnels

To its credit, Media Watch has taken ABC colleague Emma Alberici to task for an outrageously stupid, monumentally biased and absurdly ignorant report on corporate taxation. Deep-sixed by a red-faced ABC, we have salvaged and annotated for the record her original travesty

alberici IIWhen even the Crikey!-trained operatives at Media Watch concede a fellow ABC employee has screwed the pooch, you know the act was done thoroughly, absolutely and with extreme prejudice. Thus, last night were viewers treated to a tut-tutting Paul Barry lamenting newly elevated chief economics correspondent Emma Alberici’s misadventures in Tax Land. For those who haven’t followed the national broadcaster’s latest debacle, the former Lateline hostess took it upon herself to explain why rapacious companies aren’t paying the taxes she seems to think they owe.

Alas, a little knowledge can be a very dangerous thing and unexamined preconceptions make it more so, especially when combined with a chief economics correspondent’s apparent ignorance of the difference between revue and profit. Put it this way: were Ms Alberici required to pay for her own office vehicle, construct the building in which she tickles her keyboard and cover every other capital and incidental expense from her own pocket, she could tot them all up, write off the total against her salary and also pay no tax.

Worth mentioning as well is ABC editors’ likewise ignorance of editing. In a newsroom supervised by adults, editors are every incompetent, ignorant or overly enthusiastic reporters’ protection against public ridicule. Yet at the ABC, or so one gathers, a marquee name drops her copy in the subeditors’ in-box and the comma-crunchers post it as written.  Blinded to error by the lustre of fame? Garden-variety slack? Or is it, as ABC viewers might surmise, that ill-informed tosh is propagated without query or comment if the thrust of its, er, argument happens to mesh with the collective’s worldview?

Greedy capitalists bilking the national coffers? How could your standard-issue ABCer resist the temptation to go hard on that one, even to the extent of allowing this laughably florid attack on Goldman Sachs to see the light of day in Ms Alberici’s original compendium of errors:

“… the great vampire squid wrapped around the face of humanity, relentlessly jamming its blood funnel into anything that smells like money …”.

It is a familiar pattern at the ABC where, not so long ago,  it was informing audiences that RAN personnel are in the habit of torturing seaborne illegal immigants. In that instance it was hot engine parts listed as instruments of torment, no mention of “vampire squids” and  intrusive “blood funnels”.

If the ABC were to expand its hiring pool beyond GetUp! supporters and the life partners of existing employees that would likely change, but that is another story.

To its credit, Media Watch acknowledged “editorial quality control on a major story has failed yet again”. Sadly, and at odds with its usual practice of embedding lots of links so viewers and readers can examine media sins firsthand, Barry & Co embedded not a single illustrative link in their report. They mention how ABC News Director Gaven Morris raised concerns about Alberici’s article within two hours of its publication, noting that they have seen his internal email. Yet Barry skated over readers’ undoubted interest in that document with a bland “we can’t show you the correspondence”.

Why can’t they show the correspondence? Does anyone imagine that, had a similar email been obtained from, say, News Corp, it would not have had pride of place, complete with one of those mocking Strine voiceovers?

Fortunately, a Quadrant reader spotted Ms Alberici’s original, unamended effort and copied us by email at about the same time Gaven Morris was sending his own note of concern. We’ve taken that original Alberici post and compared it with the version now on the ABC News website, which can be found here.

You will find a composite version below. The struck-thru passages are those removed from subsequent versions, while the italic sections represent additions and re-writes. Note the ambient bias and loaded words, which we have bolded, in the original, plus the chief economics correspondent’s addled understanding of revenue and profit.

Read it and then wonder how $1.2 billion a year buys so little competence.

– roger franklin

_____________________________

 

Qantas CEO Alan Joyce, one of the most prominent supporters of the Turnbull government’s proposed big business tax cut, presides over a company that hasn’t paid corporate tax for close to 10 years.

The period roughly coincides with Mr Joyce’s tenure at the helm of Australia’s flag carrier.

Despite generating income of $106.4 billion, the flying kangaroo has avoided paying tax on that bounty since 2009, thanks to Australia’s generous tax concessions, depreciation provisions and the ability to offset company losses against past and future profits.

New analysis by the ABC reveals Qantas is not alone – its tax behaviour is consistent with about 380 of Australia’s largest companies. ATO corporate tax transparency data – confirmed in email exchanges with company representatives – reveals about one in five of the country’s biggest companies have paid no tax for at least the past three years.

High-flyers land no tax

Not one of Australia’s biggest airlines has paid corporate tax since at least 2013, including Virgin and its subsidiary Tigerair, Etihad, Emirates and Qatar.

Each one of those companies has sold billions of dollars worth of tickets in Australia.

Despite selling billions of dollars worth of tickets in Australia, historical losses and the entirely legitimate use of Australia’s tax laws allow them to offset those losses against future profits indefinitely.

When asked for an explanation, both Qantas and Virgin pointed the ABC to their historical losses and the entirely legitimate use of Australia’s tax laws that allow them to offset those losses against future profits indefinitely.

Both companies were at pains to point out emphasised to the ABC that, notwithstanding their zero corporate tax liabilities, they had continued to collect and pay departure taxes, fuel and alcohol excises, payroll tax, GST and FBT.

Presumably that’s what the Etihad spokesman was alluding to in his statement to the ABC.

“Etihad is fully compliant with all Australian tax requirements, and has paid all the taxes it is obligated to do so under Australian law.”

The airlines are typical of highly competitive industries where losses are frequent and capital investment is hugely expensive.

While the debate over corporate tax cuts is likely to dominate the political debate over the next year, Australia is actually unusually dependent on personal income tax and the burden of corporate tax rests disproportionately on a small number of large Australian-based companies.

In 2015/16, among the top 50 companies, 17 paid no corporate tax, leaving just 33 to shoulder the burden. Between them, they provided just under $20 billion. This includes the big four banks and our two big miners and retailers, Woolworths and Wesfarmers.

So why do so many companies, some with significant operating profits, pay little or no tax?

Apart from operating losses and depreciation, the declining value of assets is another key reason. The troubled energy industry is a good example.

EnergyAustralia’s tax-free decade

At a time when Australian households have seen their electricity prices soar, the country’s leading energy retailer, EnergyAustralia hasn’t been paying corporate tax. EnergyAustralia paid no corporate tax for the decade to 2016.

For the three years to June 2016, EnergyAustralia’s 1.7 million electricity and gas customers across eastern Australia helped it record $24 billion worth of income on which no tax was paid.

That’s despite EnergyAustralia’s 1.7 million electricity and gas customers across eastern Australia helping it record $24 billion worth of revenue for the three years to June 2016, and an operating profit of about $200m last year.

An EnergyAustralia spokesperson said the company’s performance, “reflects how the power-generation sector is underpinned by assets that were built last century”.

“Since 2006, EnergyAustralia has written down the value of its assets by $1.9 billion.”

How much tax did the big banks pay?

What about the big international banks that generate multi-million-dollar advisory fees and turnover billions in lending and trading in Australia?

Ten years after the global financial crisis – which they are largely responsible for creating which they helped create – some of the world’s most prominent investment banks are collecting tidy sums of income revenue in Australia and not paying corporate tax.

Among them is Malcolm Turnbull’s old employer, Goldman Sachs, which recently won a lucrative contract with the NSW government.

Described by Rolling Stone Magazine as, “the great vampire squid wrapped around the face of humanity, relentlessly jamming its blood funnel into anything that smells like money”, Goldman will be paid $16.5 million as the state’s financial adviser on the sale of the $16.8 billion WestConnex motorway in NSW.

The investment bank generated revenue of $1.84 billion over three years but paid zero corporate tax.

The underlying profitability of these banks is obscure but Goldman Sachs generated revenue of $1.84 billion over three years and reported operating profits in each year but paid zero corporate tax.

Ditto for JPMorgan Chase which raked in collected $2.2 billion and hasn’t paid corporate tax since at least 2013.

In one of the most audacious explanations advanced to the ABC for the non-payment of corporate tax, a spokesman for America’s biggest bank said JPMorgan was still suffering the aftershocks of the financial crisis which meant its Australian operations continued to operate at a loss.

But late last year, it emerged JPMorgan Chase agreed to pay a record $13 billion fine to US federal and state authorities in 2013.

The purpose of this fine was to settle claims it had misled investors in the years leading up to 2008.

French bank BNP Paribas also appeared to have made some bad investments taxpayers were having to compensate it for.

It hasn’t paid corporate tax for at least three years — like Goldman, JPMorgan Chase, American Express, Barclays Bank and the Royal Bank of Scotland.

The oldest foreign bank in Australia (resident here since 1881) told the ABC that despite attracting close to $10 billion in revenue since 2013, BNP failed to make any profits.

BNP said its losses, “included the write off of bad debts from lending to certain Australian domiciled companies”.

International investment banks are a good example of how large international companies with Australian subsidiaries can effectively, and legally, shift revenue to affiliates or parent groups offshore in the guise of payments for services.

This can all work to render the Australian business loss-making, and therefore not required to pay corporate tax.

Could the bank be writing that fine off against its Australian income? The spokesman didn’t care to elaborate.

 

News Corp pays no tax on $71m profit

Old and new media

All the focus on the tax shenanigans affairs of foreign technology and media companies like Google, Facebook and Microsoft has diverted our gaze from the taxpaying habits of some of their home grown rivals.

While those media businesses operating in the virtual world can minimise tax because it’s not clear where their businesses are situated, the old world media isn’t paying much tax either as their profits dwindle and they write-off the value of their mastheads.

The most obvious one is Rupert Murdoch’s News Corp, which hasn’t paid corporate tax in Australia for at least four years.  It has long arranged its affairs to pay little tax but because the value of its newspapers is collapsing, it hasn’t paid corporate tax in Australia for at least four years.

The media colossus reported total income of $8.5 billion and even boasted a $71 million profit in 2014/15 but no corporate tax was paid.

The company’s corporate affairs boss, Liz Deegan, wrote to the ABC to clarify that: “News Corp Australia has deductible operating costs and certain tax incentives and allowable credits, like R&D and franking credits, that offset the revenue disclosed.”

Its partly owned pay-TV company, Foxtel, received a $30 million gift from the federal government in the last budget, ostensibly to provide better coverage of female sports.

In the three years prior, Foxtel had also not paid corporate tax.

Fairfax, News Corp’s newspaper rival in Australia, paid $53.1 million in corporate tax over the same period….

The version now on the ABC News website continues at some length, but the above should suffice to illustrate once again that the national broadcaster’s endemic bias is compounded by a galloping incompetence. It has been 37 years since the Dix Report took a long, hard look at the ABC.  Another examination of ABC standards, hiring practices and mission would seem long overdue.

Comments [10]

  1. Alistair says:

    I think this goes down on my list of examples that provoke the Gell-Mann Amnesia Effect.
    https://www.goodreads.com/quotes/65213-briefly-stated-the-gell-mann-amnesia-effect-is-as-follows-you

  2. LBLoveday says:

    The media colossus reported total income of $8.5 billion and even boasted a $71 million profit in 2014/15 but no corporate tax was paid
    Did the ABC overlook changing “income of $8.5 billion” to “revenue of $8.5 billion” like it changed “$24 billion worth of income” to “$24 billion worth of revenue”? Surely not – wouldn’t their 2nd attempt at economic sense have been so carefully edited that what I see is what they meant?

  3. Jody says:

    Emma Anorexia knows bugger all about finance. I heard her comments on the mid-day news and both my husband and myself were flabbergasted. Particularly about Qantas which was seriously in the red until fuel prices collapsed about 2 years ago and they are continuing to order/buy the new Boeing Dreamliner. Incredible incompetence. It’s just Lefty cant.

  4. en passant says:

    I think I can see another $1.2Bn saving that will reduce Government deficit and at the same time bring in revenue from the sale of a tainted, past-its-use-by-date asset of declining (or actually near zero) value staffed by overpaid, stuffed ducks.

    You get three guesses:
    A.
    B.
    C.

  5. MarcH says:

    Catching, gutting and deep frying this wet squid of an organization then sprinkling the remains liberally with salt before consuming with gusto should be the government’s top priority.

  6. Geoffrey Luck says:

    A brilliant piece of journalism. This is the way to “out” the ABC’s bias, moralistic preaching and straight lies.

  7. Tezza says:

    When the ABC ridiculously named Alberici its ‘chief economics correspondent’, she was a disaster waiting to happen. She clearly had no competence in the area. It showed equally ABC management’s lack of knowledge of, and contempt for, the entire area of economic analysis.
    The failure of Alberici’s ‘big story’ was even worse than signalled in the editorial re-write of it, and the PM’s Office incompetent protest at the original travesty. Tax due is the product of the tax rate prescribed in law and the tax base prescribed in law: ‘taxable income’ as defined in law. Alberici’s methodology was to say tax should be the product of the tax rate prescribed by law and a tax base pulled out of her green-left hat – essentially company revenue.
    The PM’s Office complained that she should have used company profit as the tax base. But that is almost equally wrong. If the tax base were company profit as defined under accepted accounting standards, the Income Tax Assessment Act would be a fraction of its current size. The great bulk of its length and complexity arises from successive governments’ deliberate (though often wrong-headed) definition of a tax base – taxable income – deliberately different from accounting profit.
    If the ABC ever employs a real economist (a ridiculous idea, I acknowledge) it might have an interesting story on why Parliament has consciously built in law a definition of taxable income different from accounting profit. But I’m not holding my breath.

  8. gardner.peter.d says:

    According to Wikipedia Alberici graduated with a bachelor’s degree in journalism and economics from Deakin University and a bachelor’s degree in Italian from the University of Melbourne.
    Either Wikipedia or Deakin University is wrong.

  9. Joseph says:

    Perhaps Emma can go back to one of her old jobs as the presenter of the children’s program Behind The News. She is clearly out of her depth at the moment.

  10. old44 says:

    Emma has a point, if corporate Australia doesn’t pay large amounts of tax where will the money come from to pay the ABC it’s annual $1,400,000 government subsidy.