Thursday, December 03, 2009

News Corp's tax dodging in the news again

In the Sydney Morning Herald:

"The Tax Office has upped the ante in its fight with Rupert Murdoch's News Corporation, which it claims ''contrived'' to avoid tax by generating a $1.5 billion capital loss."

We don't have the inside track on this, but something occurred that looks highly abusive:

"The Tax Office said the scheme consisted of a circular series of steps which occurred on the same day - June 8, 2005.

"It began with the off-market share buy-back of shares in one News Australia subsidiary, paid for with a $39 billion promissory note, and ended several steps later with the sale of the same shares later that day, generating a $4 billion loss which was reduced to $1.5 billion. ''The share buy-back step itself makes no sense'' unless it was done for tax avoidance, the Tax Office said."

Rupert Murdoch's News Corp. has form, of course. As The Economist reported in 1999:

"In keeping with his anti-statist philosophy, Mr Murdoch hands very little of his profits to governments. In the four years to June 30th last year, News Corporation and its subsidiaries paid only A$325m ($238m) in corporate taxes worldwide. In the same period, its consolidated pre-tax profits were A$5.4 billion. So News Corporation has paid an effective tax rate of only around 6%. By comparison, Disney, one of the world’s other media empires, paid 31%. Basic corporate-tax rates in Australia, America and Britain, the three main countries in which News Corporation operates, are 36%, 35% and 30% respectively."

Like banks, news corporations have a special role in society, because of their unusual role in influencing how people think. Like banks, great care needs to be taken to stop them becoming too overwhelming. Like banks, news corporations are in a strong position to shift mostly intangible parts of themselves artificially around the world to cut tax. Like banks, big multinational news corporations are denizens of offshore. Like many banks, News Corporation was shown by the U.S. Government Accountability Office (GAO) last year to have more offshore subsidiaries than almost any other corporation - the GAO counted 152 in all, focused most heavily on the British Virgin Islands and the Cayman Islands. Of the top 100 publicly traded U.S. Corporations, only Citigroup and Morgan Stanley had more offshore subsidiaries. And, like banks, huge news corporations strive to achieve positions dominant enough to intimidate politicians and keep tightening their grip on societies. So these recent words of the British Business Secretary, Peter Mandelson, are especially chilling:

"(Mandelson) claimed last month that the Sun had agreed a "contract" with the Conservatives in which David Cameron would help News Corp's business interests, told peers: "There are some in the commercial sector who believe that the future of British media would be served by cutting back the role of the media regulator. They take this view because they want to commandeer more space and income for themselves and because they want to maintain their iron grip on pay-TV, a market in which many viewers feel they are paying more than they should for their music and sport. They also want to erode the commitment to impartiality. In other words, to fill British airwaves with more Fox-style news."

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