So, the Murdoch interests have shelled out $77 million in a remarkable tax avoidance settlement with the ACT government and the Murdoch press is still yet to report a word of it.
In March 2005 when Crikey revealed the Murdoch family was avoiding $53 million in stamp duty by breaking its controlling $8.8 billion stake in News Corp up into 10 shares and listing it on the Bermuda Stock Exchange, The Australian’s then media writer Jane Schulze was big enough to follow it up.
No such luck this time after Canberra Times chief gallery reporter Noel Towell broke the settlement story on page 1 yesterday, no doubt impressing visiting Fairfax CEO Greg Hywood.
Towell is a former suburban reporter with News Ltd in Melbourne and Adelaide who joined The Canberra Times in 2007.
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He first broke the news about the court action in a November 2008 page one story, which began as follows:
You owe us $84m: ACT to Murdoch
By Noel Towell
The ACT has launched a bold legal assault against global media mogul Rupert Murdoch, claiming his News Corporation owes Canberra’s coffers more than $84 million in unpaid taxes and penalties.
The territory’s taxman is suing News Corporation over what it describes in court documents as a ”tax avoidance scheme” dating back four years.
The Government wants the ACT Supreme Court to force Mr Murdoch’s companies to pay $53 million in alleged unpaid transfer duties, $26 million in penalties and $5 million in unpaid interest.
Incredibly, we all missed this story at the time as it was followed up by no one. There was also general scoffing in Canberra about the territory’s prospects.
Crikey erred in our original scoop suggesting it was the NSW government that was due the $53 million stamp duty bill on the 2004 transfer of the Murdoch family’s stake in News Corp when in shifted domicile from Adelaide to Delaware.
The original Karlholt prospectus didn’t specify which jurisdiction was owed the stamp duty, although there was a reference to NSW trusts legislation.
The case was due for a mention in the ACT Supreme Court last year but the parties deferred the hearing to pursue settlement talks and then the details emerged on page 38 of the mid-year budget update released last week.
Ironically, as News Ltd executive chairman John Hartigan continues to harangue politicians in Canberra about his “Right to Know” campaign, News Ltd entered a confidential settlement with the ACT Treasury, which, if leaked, could lead to a three-month jail sentence.
Alas, it’s pretty hard to hide the biggest ever tax payment to the ACT government, which was only projecting to collect $1.14 billion in total tax revenue in 2010-11.
The big tax revenue items in the final ACT budget outcome will be as follows:
Payroll tax: $300 million
Rates: $197 million
Land tax: $105 million
Murdoch settlement: $77.5 million
Gambling taxes: $51 million
The Canberra Times asserted yesterday that the settlement came from News Corporation itself and noted there was no mention of it in the December quarter earnings result released earlier this month.
That is curious because page 11 of the Karlholt prospectus includes the following under the title “Purpose of Listing”:
The listing of Karlholt (formally Cruden, Kayarem and other Murdoch family trusts and structures) may have favourable consequences for the Company’s shareholders under Australian stamp duty legislation. This is because the BSX is a member of the World Federation of Exchanges and transfers of securities that are quoted on a stock exchange that is a member of that Federation are not subject to stamp duty under that legislation. Ordinarily, transfers of shares which are not quoted on a stock exchange attract duty under Australian stamp duty legislation at a rate of 0.6% of the transfer consideration.
It was the Karlholt shareholders, namely the Murdoch family, which stood to benefit from the dodge, so why would News Corp itself settle the case when it is 85% owned by non-Murdoch shareholder? Could this be another controversial example of News Corp shareholder value leaching across to the Murdoch family, just as proposals circulate for a related party deal to buy Elisabeth Murdoch’s Shine production company for more than $1 billion?
News Ltd spin doctor Greg Baxter failed to respond to queries about who paid the settlement before deadline and independent News Corp director Sir Rod Eddington also declined to return calls to his Melbourne office at JP Morgan this morning.