Saturday, May 7, 2011

Rupert Murdoch - The Ultimate Tax Cheat!

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Pick-up any one of Rupert Murdoch's newspapers (he owns 175 titles worldwide including The Sun, News of the World and The Times in the UK), or tune in to any one of his TV Channels (he owns the Twentieth Century Fox Studio, Sky/BskyB, Fox Network, and 35 TV stations, fast-growing Fox News and Fox Entertainment, and 19 regional sports channels) and you are likely to come across hysterical stories screaming of "benefit fraudsters and "dole scroungers".

This may make you not only believe the overwhelming scale of "benefit culture" and burden on the State but that Murdoch's media empire is firmly on the side of decent hard-working tax payers. There is just one problem…Rupert Murdoch's media empire fails to pay it's tax!!!

Media tycoon Murdoch may run one of the most profitable businesses in the UK, but it appears that he has somehow managed to avoid running up a tax bill over the past two decades.

Mr Murdoch thinks it is acceptable for a Billionaire to shirk his tax bill whilst at the same time stigmatising the poor as "benefit cheats" and "dole scum".

According to a previous report in The Economist, Mr Murdoch in the 1990's saved at least £350m in tax - enough to pay for seven new hospitals, 50 secondary schools or 300 primary schools.

How he has done it remains a mystery - and News Corporation is certainly loath to give away any financial secrets. But it appears that Mr Murdoch's tax accountants have surpassed themselves - making full use of tax loopholes to protect profits in offshore havens.

Mr Murdoch also has the luxury of shifting funds from country to country across his sprawling media empire to foil the taxman. It is not just the Inland Revenue that has been left empty-handed by News Corporation's clever financial engineering. Mr Murdoch "hands very little of his profits to governments" according to The Economist.

Overall, News Corporation paid just £146m ($238m) in corporate taxes on profits of more than £2bn. In other words he is paying tax at a paltry rate of just 6%. That compares with normal company tax rates of 30% and upwards.

The financial secrecy that has characterised Mr Murdoch's empire could turn out to be a double-edged sword. On the one hand he has managed to hold on to more money. But News Corporation's complex structure, which includes 60 incorporated tax havens, such as the British Virgin Islands and the Cayman Islands, has confused analysts and investors alike.

Rupert Murdoch won his battle to buy the Wall Street Journal, previously known for a tax justice agenda. The newspaper had been very active in exposing tax dodging and other corporate abuses. Murdoch's flagship company News Corp. is a poster child for tax avoidance as The Economist discovered when it prodded into its tax affairs, and what it found was not pretty, reporting:

"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.

"Finding out the specifics of News Corporation’s tax affairs is difficult because of the company’s complex structure. In its latest accounts, the group lists roughly 800 subsidiaries, including some 60 incorporated in such tax havens as the Cayman Islands, Bermuda, the Netherlands Antilles and the British Virgin Islands.

" This structure, dictated by Mr Murdoch’s elaborate tax planning, has some bizarre consequences. The most profitable of News Corporation’s British operations in the 1990s was not the Sunday Times, or its successful satellite television business, BSkyB. It was News Publishers, a company incorporated in Bermuda. News Publishers has, in the seven years to June 30th 1996, made around £1.6 billion in net profits. This is a remarkable feat for a company that seems not to have any employees, nor any obvious source of income from outside Mr Murdoch’s companies. "

In the decade since June 1987, The Economist reported, Murdoch made £1.4 billion in UK profits yet paid no net British corporation tax at all.British taxpayers have been forced to pick up a particularly large slice of Murdoch's tax bill: in the decade since June 1987, The Economist reported, the group made £1.4 billion in profits yet paid no net British corporation tax at all.

Even The Economist, which seems to have a soft spot for the corrupt world of tax havens, choked on this, and asked why so many other companies avoid such byzantine offshore gymnastics to dodge their tax bills, stating:

Perhaps their tax lawyers are not as bright. Perhaps their boards are stuffed with conventional people who would be embarrassed to shelter profits in tax havens. Or, more likely, they may conclude that there are costs to Mr Murdoch’s way of doing things. In particular, the complexity of News Corporation’s structure baffles analysts and puts off institutional investors. Money men suspect that the company’s profits may be based not just on the returns from Mr Murdoch’s businesses, but also on financial wizardry vulnerable to changes in tax law. This may be one reason why its share price has underperformed the American stockmarket over the past five years. A low share price makes investment more expensive for Mr Murdoch than it would be were he an empire-builder with a more transparent business structure.

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