Tax conspiracy story

The AFR had a tax story today – labelled “Exclusive” – that must be one of the worst beat-up jobs I have ever seen. Just rubbish.

So here is the background: The ATO had to refund a tax payment after the federal court ruled against the ATO in a tax dispute. This would be an unremarkable story except for two factors:

  • The amount of the refund – $882 million.
  • The recipient of the refund – News Corporation.

To put this story into context the ATO provides tax refunds all the time if tax has been over-paid.

So what happened here? In 2000 and 2001 News booked a $2 billion loss following a series of paper transactions. The ATO disallowed the tax deduction and consequently collected more tax revenue than it otherwise would have. News went to court and won and so the ATO has had to refund the tax revenue it had collected with interest.

The Fairfax spin of that set of unremarkable facts is astonishing.

The single largest factor in the underlying deterioration of the federal budget announced by Treasurer Joe Hockey in December was a cash payout of almost $900 million to Rupert Murdoch’s News Corporation.

Notice the use of the work “underlying”. If you don’t know what to look for you’d think that the ATO refunding money it had legal entitlement to was some sort of rort. The thing is that the government claims to use accrual accounting for budget purposes. If it did in fact use accrual accounting that $882 million would have been a contingent liability on the governments books. The repayment of the $882 million would be charged against the years when the revenue was collected. It is true that it represents a decline the state of the budget on a cash basis (i.e. underlying) and that is what the AFR wants us to concentrate on.*

The Tax Office was deciding whether to appeal against the judgment as News Corp newspapers launched a ferocious attack on the government, kicking off with the Daily Telegraph’s headline on August 5, 11 days after the court judgment: “Kick this mob out.” In the following days, Labor leader Kevin Rudd would claim that News Corp was running a virulent anti-government campaign in exchange for concessions from the Coalition.

Unbelievable. Are we really to understand that the News Corp papers campaigned against the most useless government in modern history just so that the ATO would not appeal a federal court ruling? To prevent that sort of political corruption of the tax system is why the Tax Commissioner in (nominally) independent of government. Winning a case against the ATO in court is hardly a “concession” – a miracle perhaps, but never a concession. When personal taxpayers get a tax refund at the end of the year it is never a “concession”.

A very poor effort by the AFR.

* The great irony is that I actually think that government should only use cash accounting and accrual accounting.

Update I: Should point out that $882 million is more than half of Fairfax’s market capitalisation.

Update II: The AFR comes clean:

Under the Tax Administration Act, payments to taxpayers come out of the Contingency Reserve Fund, which sits as a contingent liability in the budget.

In the mid-year briefing in Dec­ember, total contingent liabilities stood at $7 billion.

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15 Responses to Tax conspiracy story

  1. Ant

    Of course, if Fairfax stopped printing manure they would sell more papers, make a profit and perhaps pay at least some tax.

  2. blogstrop

    Yeah but it’s Murdoch/Moloch, you know?

  3. blogstrop

    That was a Fritz Lang reference for Henry.

  4. Gab

    Unbelievable. Are we really to understand that the News Corp papers campaigned against the most useless government in modern history just so that the ATO would not appeal a federal court ruling?

    Yes that is exactly what the leftards are saying as it doesn’t take too many brain cells to arrive at such a conclusion. Rational thinking, examining the facts, looking at the evidence are all foreign concepts to the hypocritical left … oh yeah and Murdoch666.

  5. I’d be more upset that this matter took 13 years to resolve!

    A whole lot of lawyers just made a whole lot of money…

  6. H B Bear

    The great irony is that I actually think that government should only use cash accounting and accrual accounting.

    Huh? What other sort is there?

    Much as you want to give Stutch the benefit of the doubt, the AFR is still a rag. Still publishing an anti-business financial newspaper can’t be easy.

  7. Tom

    What you are seeing is what you are getting: Fairfax is trying to inflict damage on its larger commercial rival by focusing a campaign of political hatred on its high-profile owner. It’s childish to the point of delinquency. It is not news. It is activism. Somewhere in the cancerous AFR carcass, the story is being boostered because it is fuelling an irrational, feelgood loathing of Murdoch among staff who are utterly disconnected from their readership of business people, who generally are inclined to admire Murdoch’s acumen, business knowledge, ruthlessness and success.

    If you try hard enough to alienate a media audience, you will eventually succeed. That Michael Stutchbury has been captured by this immature, amateur and self-destructive culture is bizarre.

  8. johninoxley

    Bottle deposit in S.a. is more than both fauxfacts and alpbc are worth.

  9. Baldrick

    Written by Neil Chenoweth, who has as much an unhealthy interest in all things News Crop and Rupert Murdoch as Paul Barry.

  10. HK_Brother

    Its standard Left thinking behaviour.

    Instead of trying to offer a good service to compete and gain some decent money, they rather spend time on tearing down those they deeply hate…Welcome to the world of Left leaning logic! Emotional irrational behaviour!

    Fundamentally, its envy. Envy of those who do better. The Left cannot stand that someone can be better than and be more success than them! They cannot comprehend it!

  11. Monkey's Uncle

    The single largest factor in the underlying deterioration of the federal budget announced by Treasurer Joe Hockey in December was a cash payout of almost $900 million to Rupert Murdoch’s News Corporation.

    They really are shameless. To hear them tell it, you would think the government just decided to hand out a $900 million public subsidy to News Limited. And it is more than a bit disingenuous to refer to a tax refund as a “cash payment”, as though it were a form of public spending!

  12. Econocrat

    …(nominally) independent…

    Ask Westpac about the consolidation rules, and whether the Tax Office conspired to get the rules changed retrospectively.

  13. Squirrel

    “The single largest factor in the underlying deterioration of the federal budget announced by Treasurer Joe Hockey in December was a cash payout of almost $900 million to Rupert Murdoch’s News Corporation.”

    I get the feeling Fairfax readers will still be hearing about this at Budget time – “Hockey’s Horror Budget Bankrolls Murdoch’s Millions!” – or words to that effect.

  14. pseudonym

    Econocrat,

    You are quite right to refer to the nonsense that Westpac was put through a few years ago in respect of the St.George acquisition. This is something which should be publicised widely, as an example of how the Treasury/ATO mafia really operate.

  15. motherhubbard'sdog

    To complete the routing of this absurd conspiracy theory, the ATO made the decision not to appeal the Federal Court ruling on September 7, during the caretaker period leading up to the election.

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