ATO figures reveal brewers’ tax contributions

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The ATO’s latest release of tax transparency figures have revealed that CUB’s parent company did not pay any corporate tax for the fifth year running.

Of the four major brewers listed in the Corporate Tax Transparency disclosures, only Australian-owned Coopers paid tax that appears to be in line with its turnover, or publicly published accounts from which its tax arrangements can be understood.

The ATO figures show that AB InBev reported $3.5 billion in total income in 2017-18 with $409.6 million considered taxable income, but no tax was paid.

Australia’s largest brewery owner did not pay tax in the years 2016-17 or 2015-16, and its predecessor SAB Miller also did not pay tax in the previous two years that the corporate tax transparency report was published.

A CUB spokesperson told Brews News that the company was not in a position to pay tax currently.

“CUB has not been in an income tax payable position in recent years, because of carried forward tax offsets for prepaid tax,” they said.

“However, in 2018 CUB’s tax payments to federal and state governments were around $1.5 billion, most of which was excise.”

While CUB includes excise amongst its tax payments in response to questions about tax transparency, the Brewers Association, of which CUB is a member, is currently running a campaign highlighting the high cost of tax to beer drinkers, who it says pay the $3.6 billion annually collected in excise.

Big sales, small tax bills

CUB’s prospective owner, Asahi Holdings, generated $1.7 billion in total revenues and paid $1.2 million tax in the 2017-18 financial year according to the figures from the ATO.

Asahi did not pay tax in the two years prior to this and paid a total of $16.4 million between 2013-2015, it was reported.

Lion paid $62 million in tax the most recent year, on taxable income of $272.5 million. It generated $4.4 billion in revenue.

The XXXX and Little Creatures owner did not pay tax according to the 2016-17 report, but the year before paid $111 million in tax on revenues of $4.19 billion.

Correction: A Lion representative has been in touch to say that rather than not paying tax in 2016-17, the ATO did not publish data on Lion’s tax paid for FY17 because Lion changed its year end from 30 September to 31 December so it was not required to file on the ATO’s 2017 forms.

“Instead Lion’s 2018 filing covered the 15 month period from 1 October 2016 to 31 December 2017. Lion disclosed this information in the Tax Transparency Report published on its website in accordance with its participation in the government’s Voluntary Tax Transparency Code,” they said.

The only Australian-owned brewery on the ATO list was Coopers, which generated $235 million in revenue in 2017-18, of which $32 million was taxable. Coopers received a $8.8 million tax bill – more than both Asahi and AB InBev combined.

While not included in the ATO figures, Fermentum Pty Ltd, which owns Stone & Wood Brewing, declared sales revenues of $51.2 million in 2018, of which $10.4 million was profit. The company paid tax of $3.15 million.

ASX-listed Gage Roads generated sales of $33.2 million in 2018 with profit of $3.1 million incurring a tax liability of $1.08 million.

An ATO representative told Brews News that it could not provide further commentary on AB InBev’s tax affairs saying they are “confidential”.

“This means ATO cannot comment on the tax affairs of any individual or entity due to our obligations under the taxation secrecy laws. We believe this confidentiality supports full and honest disclosure to us,” they said.

Complexity of multinationals

The figures in isolation give the impression that multinational companies pay far less tax than Australian-owned breweries.

However foreign-owned entities have complex tax and accounting frameworks in place which make accurate analysis dificult.

Companies may not be paying tax for a number of reasons. According to the ATO, an entity may have zero or minimal tax payable because it earned no profit or made a loss, was utilising losses from prior years, was eligible for tax concessions or offsets, or has projects operating in startup phase.

The tax transparency figures themselves also come with caveats, and Dr Rodney Brown, lecturer at the school of Taxation and Business Law at the University of New South Wales, said that the ATO results for the four brewers demonstrate the underlying problems with the information provided.

“Additional explanation is required to make sense of the results because the numbers are taken from the tax returns of these companies and there is no direct link to the financial statements prepared by these firms and in most cases there are perfectly legitimate explanations for any variations, inconsistencies or year-to-year volatility.

“By not providing additional context, the information is likely to lead to misunderstandings and misinterpretations,” he explained.

Transparency of transparency

Guidelines from the Corporate Tax Association declare that tax is only payable on taxable income, rather than total revenues or accounting profit.

Paul Suppree, associate director of the Corporate Tax Association, which represents major companies in regards to corporate tax issues, said the numbers published by the ATO may provide limited information to the public, but companies will disclose data to the ATO which is not publicly available to help them determine tax contributions.

“[That’s] why it is important in reviewing or dissecting the published numbers, the ATO or other’s commentary is used to provide further context on what the numbers do and don’t mean,” Suppree told Brews News.

“In terms of tax transparency it’s important to note there are a number of disclosures made publicly by companies to stakeholders, but also mandatory taxpayer-to-ATO disclosures on many matters, including areas such as transfer pricing, country by country reporting, reportable tax positions and detailed tax return disclosures on a yearly basis.”

The ATO also acknowledges that the information they publish may not always provide any insight on whether businesses pay the ‘right’ amount of tax.

“Multinational corporations’ tax compliance is complex due to the interplay of domestic and international rules and the nature of their business structures,” a spokesperson for the ATO said.

The spokesperson said that many companies were signed up to the Voluntary Tax Transparency Code. Lion is the only signatory of the four brewers listed.

“In many cases, this information is sufficient to provide the community with high levels of confidence that the company is functionally fully compliant with Australia’s taxation system.”

However the ATO acknowledged that some companies merely publish the legislated minimum information necessary.

“In relation to these companies, it is important to note that the Australian Taxation Office has the detailed information necessary and sufficient to hold them to account, but clearly the public will be less informed as to those companies’ taxation affairs.”

Dr Brown of UNSW said that several academics have highlighted the difficulties with the information provided, and that it is insufficient to calculate effective tax rates which is generally considered as a good indicator of levels of compliance.

“Effective tax rates are usually calculated as some measure of cash taxes paid or pre-tax income,” he explained.

“If this rate is calculated for the four companies of interest, the rate is well below the statutory corporate tax rate of 30% with the exception of Coopers (their range is 26.1% to 29.8%).”

He explained that where tax payable is missing, this could be due to the company legitimately recouping tax losses made previously, or through other deductions or credits.

“Alternatively, it could be due to the company engaging in aggressive tax planning such as overly aggressive transfer pricing with other group subsidiaries not located in Australia.

“However, the information provided by the ATO does not elaborate on such issues so we cannot make any informed judgement on this,” he explained.

The shortcomings of these disclosures means that it is simply not possible to make informed comments on whether the “right amount of tax has been paid”, which Dr Brown pointed out is supposed to be one of the aims of the disclosures from the ATO.

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