Qantas: $46 billion income, zero tax + Virgin may never pay tax + Tiger will never make a profit?

[Strategic Aviation]

Qantas: $46 billion, zero tax and a neat timing caper - MichaelWest.com.au

Hands down, Qantas ranks as the biggest tax avoider in Australia if you take the Tax Office transparency data and simply look at who recorded the most income over three years and paid the least tax.

The airline raked in a Brobdingnadgian $46 billion in total income, made $264 million in taxable income and showed no tax payable.

Qantas had notched up $3 billion in tax losses in the lean years when jet fuel prices were higher. This is why it paid no tax despite the heroic revenues. Nonetheless, we have caught them being slightly devious.

In any case, Qantas is not at the top of our Big Tax List because tax losses are a reasonable excuse for not paying tax. Also high on the list of big revenue earners and zero tax payers are beleaugered steelmakers Bluescope and Arrium, coal miners Peabody and Anglo American and good old motorway operator Transurban which racked up $5.8 billion in income over three years and paid no tax (but of course insists that one day, at the back end of its long toll-road leases, it will pay a lot of tax).

For its part, Qantas still has $951 million worth of tax losses in the kitty so it is unlikely to pay tax for at least another year or two (by which time it might be making losses again).

Virgin looks like it may never pay tax. It still has $2.3 billion in tax losses to “shelter” it from having to pay tax on future profits. Yet Virgin is one of those companies which has the knack of making losses, year in and year out, while somehow still surviving as a going concern.

No doubt, there are some shady arrangements with key offshore associates whereby the cash is raked out from the Australian entity. It notes in its accounts that its tax losses have “no expiry date”.

Even more interestingly, as Virgin owns Tigerair, it says Tiger has its own tax group and – this is bizarre – it cannot foresee using its tax losses.

Is this an admission that Virgin management thinks Tiger will never make a profit? And, if so, what the blazes is it doing in business?

 

[rock86]

This is really just a click bait story with absolutely no substance.

A few little comments regarding notes in the Financial reports and then that there is a disparity between their Statutory profit & Taxable position, well no cough. There are countless reasons for this and most are not devious ways of avoiding tax, but purely due to some of the stupid differences between how you account for items at a statutory level under the AASB standards and then account for them under the Taxation act.

There needs to be some proper investigation & explanation to where & how they think the numbers are fudged, not some simple little comments.

 

[theblank]

No doubt, there are some shady arrangements with key offshore associates whereby the cash is raked out from the Australian entity. It notes in its accounts that its tax losses have “no expiry date”.

Just because they pay no tax, therefore he concludes there are shady offshore arrangements.
"No doubt" he has no facts to support this, and is just saying what the keyboard warriors want to hear.

 

[BAM1748]

They do pay taxes, just not income tax or as little as they can.

 

[docjames]

Also, a substantial % of that 46bn will be GST applicable.....

 

[dajop]

Also, a substantial % of that 46bn will be GST applicable.....

Some would be GST paid, but probably on less than 1/3 or 1/4 of QF Revenues. Take out international revenue (non-gst able), and B2B components - freight, loyalty & a good chunk of QF domestic , Jetstar overseas carrier and international revenue, you are left with GST payable by individual consumers buying QF dom and JQ dom fares.

 

[rock86]

Also, can someone please tell me where he is getting $46bn in revenue from? A quick look at their annual report and it is no where near the level he states.

 

[dajop]

Also, can someone please tell me where he is getting $46bn in revenue from? A quick look at their annual report and it is no where near the level he states.

From the link:

.... look at who recorded the most income over three years ...

 

[burmans]

Well of course calling it an "income" tax when it's really a profits tax is part of the problem. Its quite possible for a company to have plenty of revenue/income but still lose money, and Qantas was exceptionally good at doing exactly this for quite a while.

 

[rock86]

From the link:

Ah, didn't read the "over three years".

Still as I said above, most of the article is unsubstantiated drivel.

 

[moa999]

And most obviously you pay taxes on 'Profits' not Revenue.

And these 'Tax Losses' are from when the business made a loss (but it's not like the government chips in 30%)

 

[casanovawa]

They aught to changed the tax system so that these big companies do have to pay at least some tax, whether that is a bare minimum percentage of revenue etc... For some i wouldn't care if they got a baseball bat out to deal with them...

If your such a lousy company, especially in the non renewable resource sector, where you never make a profit (through of course all the off shoring and intra company loans etc) i would assess you as not being of the quality that we want you operating in Australia and you go get stuffed... Wonder how quick some profits would suddenly appear?

 

[Andyc]

They aught to changed the tax system so that these big companies do have to pay at least some tax, whether that is a bare minimum percentage of revenue etc...

It can be easy to forget that many of these companies pay lots of tax - just maybe not much income tax on profits.
Payroll tax is usually around 5% so if the business is labour intensive (retail, services, hospitality is often >20% of sales) then it can be a significant tax on profits.
Similarly with GST, not all businesses get to claim back the GST they pay on purchases (eg. banks) so that can also be a large hidden tax.
For companies that do lots of entertaining (advertising, sales, marketing) there is Fringe Benefits Tax ($1 expense = $1 tax).
The list goes on.

No doubt there are some tax avoiders, but I think a lot of companies doing the right thing and paying a lot of tax can get smeared by articles like the above. They may be paying lots of tax, but a loss-making year or an increase in investment/refurbishments can see their tax bill shrink.

 

[rock86]

It can be easy to forget that many of these companies pay lots of tax - just maybe not much income tax on profits.
Payroll tax is usually around 5% so if the business is labour intensive (retail, services, hospitality is often >20% of sales) then it can be a significant tax on profits.
Similarly with GST, not all businesses get to claim back the GST they pay on purchases (eg. banks) so that can also be a large hidden tax.
For companies that do lots of entertaining (advertising, sales, marketing) there is Fringe Benefits Tax ($1 expense = $1 tax).
The list goes on.

No doubt there are some tax avoiders, but I think a lot of companies doing the right thing and paying a lot of tax can get smeared by articles like the above. They may be paying lots of tax, but a loss-making year or an increase in investment/refurbishments can see their tax bill shrink.

Andy, no point using valid arguments as it never works, especially in this area of contention.

While there are most certainly companies out there that actively avoid paying income tax by being very aggressive (some would say illegal) in setting their tax policies (ie. dealings with related international parties for goods purchase price, debt funding, IP license fees etc.) - I'm looking at you Apple & Chevron - which are two amongst others that stick out quite considerably.

But there are a whole lot which do not actively try to avoid income tax, but it is a part of business where you miss targets, require significant un-budgeted spend etc. and ultimately end up being in a very low if at all taxable position. On top of that as Andyc has pointed out most, of these companies pay hefty indirect and other taxes (in some companies this could possibly be up to 20% of your revenue) in the running of their businesses, but for some reason this doesn't ever figure into the conversation as people seem to be so fixated on pure income tax.

 

[dajop]

While there are most certainly companies out there that actively avoid paying income tax by being very aggressive (some would say illegal) in setting their tax policies (ie. dealings with related international parties for goods purchase price, debt funding, IP license fees etc.) - I'm looking at you Apple & Chevron - which are two amongst others that stick out quite considerably.

Yes in analysing QF's profitability and taxability, they don't have the opportunity to set and make big IP royalty payments to an overseas parent like some of the companies that are usually discussed when talking about tax avoidance. I guess the spotlight for QF would be on their write down's which, IIRC, heavily contributed to their losses a couple of years ago.

 

[rock86]

Yes in analysing QF's profitability and taxability, they don't have the opportunity to set and make big IP royalty payments to an overseas parent like some of the companies that are usually discussed when talking about tax avoidance. I guess the spotlight for QF would be on their write down's which, IIRC, heavily contributed to their losses a couple of years ago.

Exactly.

And in respects to QF's write-down's (note: I haven't analysed the accounts but speaking generally), this will be either an impairment write-down or a revaluation of their PPE both of which are purely transactions that go through the statutory financial reports. It will affect their deferred taxes on the balance sheet, but won't affect their taxable position as you can't claim these accounting write-down's as a taxable deduction.

QF's recent taxable losses, if I remember correctly, was from the price of oil being so high which they hadn't fully hedged against, coupled with Virgin aggressively targeting the domestic market which reduced domestic airfare values.

 

[casanovawa]

I am usually pro business but there is no way these companies are all legitimately making zero profits and I don't give a stuff how many indirect taxes they pay just like every other company has to pay them... And though Qantas might not be able to take as many dodges through a foreign ownership structure you can bet they do a few ridgey didge accounting tricks... But there are certainly other companies that are completely having a lend of the Australian public, Nike particularly being one that likes to move money around...

And any time the ATO and authorities wise up and put the structures in place to go after them they should be hit with multi year tax bills... I have no more time for corporate parasites than i do for the bludgers that always whining about how much tax they have to pay and half the time they pay no net tax...

Too many businesses these day are forever whining, have no cadet or training programs and want workers churned out ready trained and qualified, offshore everything they can and still want more from the govt and the public...

 

[Isochronous]

Just another idiot journalist who doesn't understand finance or accounting.

 

[Strategic Aviation]

Tax-free billions: Australia's largest companies haven't paid corporate tax in three years - ABC News

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.

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.

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 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.

There's no case for a corporate tax cut when one in five of Australia's top companies don't pay it - ABC News

High-profile chief executives like Qantas chief Alan Joyce are adamant that investment decisions rest largely on the rate of a country's corporate tax. But it's hard to see how a lower tax rate is an incentive for investment when one in five of our biggest companies haven't paid any corporate tax at all in at least three years.

Qantas is about to clock its 10th year tax free. Qantas won't pay tax again until its profits exceed the tax losses recorded since 2010. Only when all the accumulated losses are offset will a lower tax rate mean a higher cash flow. Besides, regardless of where the corporate tax rate sits, the airline has already indicated an intention to invest $3 billion across 2018 and 2019.

The overwhelming benefit of higher profits flows to shareholders. A zero corporate tax bill at Qantas has certainly seen one significant wage rise at the company — the chief executive's. The benefit to workers has been less pronounced.

According to the Australian Services Union, representing just under half of all Qantas workers, the average pay rises for staff since the airline has returned to profitability have barely kept pace with inflation.

 

[rock86]

Just another useless 'journalism' piece for the masses with really no substance.

All it does is paints a picture that the sheep want to hear.