Some people never learn

A few years ago we posted a piece about Michael West – then employed by the now defunct Fairfax Media:

An international expert who can’t tell the difference between revenue and taxable income? Really? A journalist that doesn’t bother to check? Wow. Simply wow.

At the time I was quite astonished that a finance journalist would confuse revenue and taxable income.  Fairfax had to clarify:

Fairfax Media also wishes to clarify that the $15 billion presented as taxable “income” in these stories relate to revenue and not taxable profits.

But this is a common problem. Emma Alberici made the same “mistake” at their ABC last year. Even the ABC identified problems with the article:

An internal ABC review found significant problems with the article, including that it didn’t mention that all the largest five and most of the top-ten companies by value pay corporate tax; that depreciation, amortisation and operating losses are not tax concessions, which was implied by the article; and that the suggestion that JP Morgan was writing off a US fine against its Australian income was highly implausible.

Other problems included describing Etihad, Emirates and Qatar as Australian airlines; accusing companies of lending money to Australian operations at inflated prices to reduce tax; implying Babcock & Brown shifted profits overseas to avoid tax; failing to mention that property trusts are not liable for corporate tax; not realising CSR had sold its sugar business; and describing MYOB as a corporate adviser instead of a software company.

The ATO made this statement:

In reviewing the data, there can be a disproportionate focus on the number of groups which paid either no tax or small amount of tax relative to gross income. As we are trying to build trust and confidence in the system for all taxpayers, it is important to remember that:

  • corporate income tax is payable on profits, not gross income
  • profits for tax purposes are closely linked to realised earnings, not paper earnings
  • in any given year a significant percentage of even the largest companies make losses, not just for tax purposes, but also for accounting purposes
  • it reflects the tax returns as lodged, and does not reflect subsequent ATO compliance activity.

While information included in the corporate tax transparency report may be new to the community, it’s not new to the ATO. The ATO has access to far more detailed information and regularly engages with these large companies to assure their tax behaviours, with a particular focus on companies which make sustained losses.

Let’s emphasise that: “corporate income tax is payable on profits, not gross income”.

Okay – why am I banging on about this? Well Michael West is still at it.

According to Roy Morgan research, 3.9 million Australian households had a Netflix subscription during the June 2018 quarter. The average Netflix monthly subscription is about $12.72 before GST, delivering Netflix an estimated gross income from Australia of $595 million for 2018. User numbers for June 2018 were up around 11.7% on the prior year, which gives estimated Netflix gross income from Australia of $533 million for 2017.

The estimated income for Netflix Inc in Australia of well over one billion dollars in two years, and growing rapidly, might lead a rational person to conclude that Netflix pays a significant amount of income tax to the Australian Taxation Office. …

In the year to 31 December 2017, Netflix Australia Pty Ltd paid income tax of $0.185 million or around 0.0035% on the estimated subscription income of $533 million flowing out of the country. Individual taxpayers can only dream about a tax rate of 0.0035% on their total income sourced from Australia.

So we are invited to believe that Netflix has no expenses. No royalty fees to be paid? No production costs on any of the original shows they produce? No business expenses?

This entry was posted in Fake News, Taking out the trash, Taxation. Bookmark the permalink.

42 Responses to Some people never learn

  1. BorisG

    Sinc, to reverse your question, do yo think Netflix taxable income was less than 1% of revenue ?

  2. The Beer Whisperer

    Feigning stupidity to deceive. As we’ve seen with Trump, the purpose of false allegations is to create an association between entities and bad behaviour.

    It is a particularly nasty form of cretinousness that these odious individuals possess, but have far more say than the average person.

  3. Winston

    If you use the frame of reference that all income first belongs to the government it makes more sense.

  4. Sinclair Davidson

    BorisG – without looking at their Australian financials (and especially their tax and financial accounting reconciliation) we can have no idea about whether they are paying “enough” or “too much” tax.

  5. Ben

    It’s all about telling the bigger picture: fear.

    Accuracy is irrelevant,

  6. Roger

    Journalism is dead.

    It’s now just a mask for political advocacy.

  7. duncanm

    Boris, Sinc. To get an idea, the 2018 US annual report shows International Streaming profit at 9% of revenue, after a couple of years of losses (-2%, -16%).

  8. duncanm

    there’s also numbers in there for foreign tax provision.

  9. Mother Lode

    The ATO is a huge organisation armed to the teeth with regulations and powers, its sides groaning with the sheer mass of agents, auditors, lawyers, warlocks, goblins and such, watching always with a million eyes, talons strained and aching, desperate to find relief in soft warm flesh. Unceasingly ravenous, unflinching, unfeeling, unflagging, and unstoppable.

    It has one purpose: Get money. This is its one thought. Its heart beats for nothing else. Its vision hunts for nothing else. The stuff that glues yesterday to now, and heaves them from now to tomorrow, is just this.

    The ATO would wear Sauron down til he was just an old guy in a silly hat, would present Hades with a land tax bill for the underworld, and would fine cynodonts out of existence to protect the Dinosaur tax base.

    Big as Netflix, Gulag, and Apple are, they are dwarfed by that behemoth. And unlike the ATO, they must spend 99% of their effort trying to win the money in the first place, while the ATO is 100% dedicated to prying the money from them.

    The reason lefties (such as the ABC and Neinfax) are so hot for these stories is because they assure them that there will be more tax money for the government to spend on them without the government actually taking any more of their money.

    Every lefty believes there should be more tax money being spent for their benefit, but none of them believe they themselves should be paying more tax.

    They like to present the right as greedy because they don’t want to pay more tax – but then nor does the right want more spent on themselves. The left want to keep every dollar they can, and in addition be subsidised by other people.

    Who is greedy again?

  10. Slim Cognito

    Westy only has 3 comments on his article. I think we can at least be assured that he is not peddling his wrongology to a significant audience.

  11. Remember, these are the people who believe in catastrophic global warming ending the world in 11 (now) years. Nothing escapes them.

  12. I_am_not_a_robot

    Presumably all these journalists are on salary and have been all their working lives.
    Even so, they must claim tax refunds for expenses, for instance I’m damn sure Emma Alberici would claim everything she possibly could from her gross speaking income.

  13. Mak Siccar

    Perhaps the inimitable Michael West needs lots of hyperbowl to get people to read his articles?

  14. classical_hero

    The same people don’t understand the difference between a subsidy and a tax credit.

  15. FelixKruell

    I trust this is why West got fired by Fairfax. He was too economically illiterate even for them.

    The question back at the ABC and Fairfax is how much corporate tax they pay on their revenues? And why isn’t it the same 30% as other companies, or 47% rate for individuals?

  16. JC

    Huh?

    The question back at the ABC and Fairfax is how much corporate tax they pay on their revenues?

    Who?

    And why isn’t it the same 30% as other companies, or 47% rate for individuals?

    Who pays income tax on revenues?

  17. Blair

    What demand does Netflix place on the Australian economy apart from the need for defence, police services and the law?

  18. FelixKruell

    JC:

    I see you’ve woefully misunderstood again.

    The ‘who’ being the authors making these assertions (West and Albericci)

    The tax on revenue rather than profit is kinda the point. They keep quoting tax paid as a percentage of revenue to shock readers. So ask them to apply the same erroneous metric to their own organisations.

    Get it now?

  19. The degree of economic illiteracy (if there’s such a phrase) exhibited by journalists, including business journalists, is at times sufficient to strike dumb a person capable of adding 1+1=2
    I was once interviewed regards a specific event by a large number of business journalists, from a wide range of publications.
    The interview was included in a large number of written articles – of those articles found, all except one had made a basic blooper on the scale of the error above, probably a simpler error.
    This included dedicated business publications.
    I’ve never really gotten past this, as in never properly come to terms with an entire cohort of journalists not understanding their craft – making an error which should not be made by a Six year old.

    Interestingly, the only publication in which the journalist did not make this economic error was…… The Guardian.

  20. West making the blooper a second time can have only two explanations:
    1/. He’s incredibly thick.
    2/. He’s deliberately misinforming his readers.

  21. JC

    Kruell

    You need to be clearer when posting comments. It looked like you also believe taxes are come directly out of revenue (before expenses). Look at the abortion of a thread you created yesterday, for instance.

  22. JC

    I was once interviewed regards a specific event by a large number of business journalists, from a wide range of publications.
    The interview was included in a large number of written articles – of those articles found, all except one had made a basic blooper on the scale of the error above, probably a simpler error.
    This included dedicated business publications.

    Yea right. Driller was a former CEO of BHP.

    Driller, no pubbling. That’s the rule. Obey it.

  23. How’s the eyes, New York Times.
    You realise what is the cause?

  24. FelixKruell

    JC:

    You need to be clearer when posting comments. It looked like you also believe taxes are come directly out of revenue (before expenses). Look at the abortion of a thread you created yesterday, for instance.

    If you bother to read the comments before responding, you’ll find they’re plenty clear.

    Now, I wonder if trump knows whether tax applies to revenue or profit?

  25. If you bother to read the comments before responding, you’ll find they’re plenty clear.

    He’s not called “Tim Dunlop” without good reason.
    He’s well known for inability to read for comprehension, then doubling down on the cluelessness.
    Situation normal.

  26. JC

    Driller

    Stick to the open thread. You’re comments on specific threads are worse than useless. Your boring account of being an important industry leader and nothing else is simply another version of narcissistic pubbling. You’re such a dickhead.

    Big time Pubbler from Shit creek that every financial journalist in the country is fighting to interview. Yep, totally believable. Lol. Shoo off.

    Kruell

    If you bother to read the comments before responding, you’ll find they’re plenty clear.

    I did and it wasn’t clear if you thought the same way as alberici.

    Now, I wonder if trump knows whether tax applies to revenue or profit?

    I’m sure he doesn’t.

  27. Chris M

    So we are invited to believe that Netflix has no expenses.

    Sinc believes their annual expenses would be running at half a billion dollars? You should be in charge of the ATO.

  28. FelixKruell

    Chris:

    Sinc believes their annual expenses would be running at half a billion dollars?

    Well, youve got to hire the lawyers to help you comply with all the regulations imposed in Australia. Then the tax guys to help you figure out your income tax, GST, payroll tax, fbt, and super obligations. Some lobbyists to ensure the government doesn’t go imposing local content quotas. That’s about $10m a year right there.

    The other $490m is likely payments to its related parties for the app and the content, without which there would be no revenue.

  29. Mundi

    I wonder what he will say when he finds out Australia Post will pay zero tax on its $6b revenue because it has zero profit.

  30. John A

    duncanm #3168924, posted on September 27, 2019, at 12:31 pm

    Boris, Sinc. To get an idea, the 2018 US annual report shows International Streaming profit at 9% of revenue, after a couple of years of losses (-2%, -16%).

    Well, it would appear that the simplest answer to resolve the dilemma (Occam’s razor) is that carry forward losses extinguished the tax liability in the two years under “review”.

    Mr West possibly assumes that losses belong to the company but profits belong to the government. That’s an interesting reversal of the standard crony capitalist line.

  31. Big time Pubbler from Shit creek that every financial journalist in the country is fighting to interview. Yep, totally believable. Lol. Shoo off.

    And just who the farq are you? (Besides a doofus no more accurate than the New York Times?)
    You don’t have what it takes to give orders to me, clearly this gets on your goat, tough luck – it must also drive you up the wall to not be able to dox my real name or location.

  32. Percy Popinjay

    The stupid.forking.gliberals imposed a special tax on Netflix several years ago.

    I was so annoyed about it I ditched my subscription for over three years and have only recently renewed it. I’ll ditch it again before the tax exceeds a certain proportion of my annual subscription. That way I’ll pay the same amount over a twelve month period as I would have without the tax. Netflix will be duly informed of this course of action, as they were back when I originally ditched the subscription.

  33. Percy Popinjay

    BTW – good luck trying “to google” when that tax was imposed – if I remember correctly, it would have been around 2015.

    Oh, here we go – read this marxist bullshit and weep, ye mighty:

    In light of the ongoing surge in the business of digital downloading, a growing proportion of consumption is not being caught by the Goods and Services Tax (GST). Tax experts contend that ‘the absence of GST on services and digital products imported by consumers represents an omission from the tax base that has been increasingly untenable’
    Under current law, things imported by consumers and which are not goods or real property (including digital products and services) are not subject to the GST. This results in forgone GST revenue, which would be passed to the States and Territories. It also places domestic businesses, which generally have to charge and remit GST on the digital products and services they provide, at a tax disadvantage compared to overseas businesses.[2]

    In order to maintain the integrity of the tax system and offer a level playing field for domestic suppliers, the Government announced in the 2015–16 Budget that it would extend GST to offshore intangible supplies to Australian consumers with effect from 1 July 2017. The measure is estimated to generate a revenue gain of $350 million over the forward estimates period.[3]

    The key features of the ‘Netflix tax’ are …

    I’d wager the ‘Netflix tax’ “generated revenue” significantly less than the bollocky, plucked out of an imbecile’s fundament figure noted above.

    Fuck them.

  34. Old Lefty

    It seems like another planet when a professor of history and chairman of HSC examiners could be an out and out Tory. The prof I remember fondly liked to tell of an examinee who, trying to mount his Marxist high horse, came out with ‘bourj’ (crossed out), ‘burge’ (crossed out), ‘middle class’. No doubt said examinee went on to a brilliant career in the ABC, Fairfax or post-1970s academia.

  35. David Brewer

    Netflix Australia Pty Ltd paid income tax of $0.185 million or around 0.0035% on the estimated subscription income of $533 million flowing out of the country

    This is truly woeful analysis. The tax paid was not on the subscription income. That income itself has only been guesstimated by the writer anyway. We don’t know if it “flowed out of the country”. And if it did, it is likely to be taxable elsewhere – after deduction of the no doubt very substantial expenses incurred in making it.

    If you read the whole article, there are lots of clues to its unreliability, including the tedious attempt at a satirical introduction, a frequent leaping to conclusions, and persistently intemperate language covering vague and dubious points.

    The whole site seems dedicated to dodgy, and ranty, economic commentary. Another recent article, giving a sort of Wayne Swan view of the current federal budgetary situation, would be worth a post on its own, as it contains a veritable cornucopia of biased, bungled and uninformed analysis. Its core thesis is that the budget would long since have been in surplus if Wayne had remained at the helm.

  36. Chris M

    Thanks Felix. And David ^ is right; seems the only truly reliable news these days is on the Babylon Bee.

  37. Yohan

    Regarding Netflix, what is it not mentioned is they have lost money since inception. Netflix has been growing their business using investor money to build out their subscriber base and investing in content creation. Given this is the case, how could you possible expect Netflix to be paying ANY corporate profits to the ATO?

    Usually the ATO and a multinational company will work out what amount the Australian arm of a business should pay based on the proportion of total profits worldwide. PROFITS being the operative word. There are no Netflix profits. Not right now.

    This is a just another left-wing journalist whining about total gross income, and pretending that income is profits, when the business is really operating at loss.

  38. nb

    The lovely thing for future socialists is that they will still be able to say real socialism was never tried even if the current crop have their every wish granted. Why? Because the current dears are so amazingly stupid. Their every idea is so deranged they’ll be easy to disown in the future.

  39. nfw

    I read the Netflix scenario the other way round. Given the small amount of tax paid on profit it must have huge expenses to write down so much of its revenue to that little taxable amount. On the other hand perhaps it’s just corporate greed which our gutless politicians will do nothing to address as they have to have post politics jobs to you know. Even Craig I Have a Credit Card and Never Lied to Parliament Thomson has a well paid post politics job. I know, tax Netflix to oblivion and let NBN provide a service! That would be just like the Soviet Union and all the socialists (read Canberra and public servants everywhere) should rejoice. Ah, that only we taxpayers could simply declare our “profit” annually and therefore pay no tax.

  40. old bloke

    Salvatore, Iron Publican

    Imposter! The only person who can claim that title is Wilson Tuckey.

  41. Salvatore, Iron Publican
    Imposter! The only person who can claim that title is Wilson Tuckey.

    Heh.
    The name was homage to “Nilk, Iron Bogan”
    Wilson Tuckey actually used a piece of steel cable. The name “Ironbar” was due to the white-collar class’ (journalists et al) unfamiliarity with practical stuff.
    I fully support & empathise with him. Sometimes you’re faced with a choice, let the trash of society take control (irreversible) of your business & livelihood, or fight for it.
    Nobody will help you,
    Not the staff (who run away & later sue or screech about your “duty of care” toward them)
    Not the police (who should know all about “.. if you back down, you’re finished“)
    Not the court system, who’ve never had to fight for anything in their entire free-ride life,
    Not the general public who often have a softcock life & see you as a pariah.

    The only ones I’ve found understand, are Rugby Union players (interestingly Rugby League players rarely get it) Rodeo Riders, Jailbirds, & Fairground operators.
    Or someone who has had faith in the system, & been ruined by it through no fault of their own.

  42. Anthony

    Globally Netflix loses US $2-3 billion per year. I’m honestly surprised their investors are happy to continue with this situation.

    As to Michael West… words fail me, the man seems to see tax avoiding companies everywhere but seems immune to the understanding that profit and revenue are different things, or that companies can carry losses forward etc. Really, I’m surprised and depressed that he can still be published.

Leave a Reply

Your email address will not be published. Required fields are marked *

This site uses Akismet to reduce spam. Learn how your comment data is processed.