Yesterday the AFR had a long breathless story about how Walt Disney is profit shifting out of Australia, leaving us “McDucked”.
So there is a long complicated story about cash-rich Australian subsidiaries being sold for nominal sums and then on-sold and so on and so forth. At the very end of the story we read:
Our global effective tax rate has averaged 34 per cent for the past five years and 35 per cent in the most recent year,” said Zenia Mucha, Disney’s spokeswoman in the US.
“We manage our tax affairs responsibly and aim to fully comply with all applicable tax rules. Your assertions are not based on an accurate understanding of our global tax position.
Okay – so let’s consider that statement very carefully. We are invited to believe that Walt Disney has undertaken a complex set of translations, including both Australian and non-Australian operations, to avoid paying a 30% tax rate in Australia and ends up paying 34% on average over the past 5 years.
Seems to me that one of two things is likely to explain that situation:
- Walt Disney just aren’t very good at profit shifting and are paying more tax than they otherwise would have, or
- There is some other explanation – whatever it was Walt Disney was up to, profit shifting and avoiding Australian company tax rates wasn’t the prime motivation.
What is particularly disappointing is that the AFR doesn’t see any contradiction in a company undertaking massive transactions to “avoid tax” and yet face a higher tax rate on average after that. It simply doesn’t occur to them to question whether the whole premise of the story is consistent with the tax rate actually being paid.