Feb 23, 2018

‘You can’t pay tax if you don’t make profits.’ Oh, really?

When company tax cut spruikers insist the low rate of tax actually paid by companies is because they don't make profits, some scepticism is warranted.

Glenn Dyer and Bernard Keane

Crikey business and media commentator / Politics editor

Alan Joyce Qantas

Australia's big business is tired of being your whipping boy, thank you. They've dispatched Jennifer Westacott, Chief Executive of the Business Council, to run a "poor us" media campaign on behalf of Australia's and the world's biggest companies. And they've hit back at the criticism that many pay no tax.

One of the attacks on the ABC's Emma Alberici was from Qantas' Alan Joyce, who cried that "if you don't make money you don't pay the tax ... That is the way the system works. It allows companies to take a huge loss and digest that over time." That is indeed the way the system works: incur a big loss or massive writedown, and you get to offset it against future profits. Some companies, like Qantas, go on "digesting" losses over years, avoiding paying tax on current profits.

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12 thoughts on “‘You can’t pay tax if you don’t make profits.’ Oh, really?

  1. Robert Smith

    Lots of good points here but the last comment about tax paid as a proportion of revenue is not one of them. Companies in different businesses may have vastly different profit margins – say Woolworths small margins vs Telstra which has many times greater margins on revenue – so income tax which is on profit cannot be measured as a proportion of revenue. What matters most to a company is return on equity, not necessarily return on revenue.

    1. Draco Houston

      People can’t tell Centrelink to pay them welfare because they did not make a profit if they are earning, and yet this is what companies do with the ATO.

  2. Robin Brett

    What? A loss isn’t a loss if it’s the result of a management mistake? BHP didn’t really lose the $20 billion that it wrote down?

    Maybe the tax system should be changed so that companies pay tax on the profit they should have made rather than the profit they did make. And let’s put Messrs Dyer and Keane in charge of deciding how much profit each company should have made. You can bet companies would pay their fair share of tax then

    1. Woopwoop

      I can’t get away with paying no tax on my (hypothetical) $100,000 income this year because for the last few years I didn’t earn anything.

  3. bushby jane

    Tax gross revenue perhaps.

  4. Bill Hilliger

    I’m a self funded retiree and proud that I pay more tax than Qantas, Mobil Exxon, and Rupert Murdoch’s NewsCrap organisation to name just a few of the many combined.

  5. AR

    Tax turnover and charge a Tobin tax on capital flow.

  6. klewso

    And then there’s those “(MCA) royalty taxes”.

  7. Robert Garnett

    Socialise losses and privatise profits. So what else is new?

    Why can’t a casual worker average their tax over ten years? Companies can.

  8. Dog's Breakfast

    “Thank you, taxpayers.” Says it all really.

    I’m really not sure why a company can write off expenses here, for setting up a business overseas that goes bad. Surely it’s a case of them taking a risk, that’s good, and the write offs or benefits are taken in that country, not shipped back here for tax write offs. There is so much wrong with international tax treaties and covenants, they really need a complete re-write.

    Robin Brett makes a valid point, however the big resources companies and banks have a habit of buying in at ridiculously inflated prices at the top of the market. It may curb those behaviours if they weren’t so easily able to fob it off to the taxpayer. I’m pretty sure that Rio Tinto and Glencore haven’t paid tax in Australia in years (decades, ever?) and yet they have revenues in the multi-billions. Michael West has investigated both extensively and bells the cat on their international tax games.

    I’d suggest that a working tax rte of 25% or 2% of revenue, whichever is the greater, would be a reasonable trade off for reducing the tax rate for big corporates. As they are being put forward, the tax reductions are just a case of giving money away for no good purpose.

  9. Phen

    This article is based on a false premise. Impairments are not deductible for tax purposes and cannot be offset against taxable income.

  10. sheamcduff

    I made a loss last year [outgo > income] … and paid tax [more than QANTAS apparently].
    In fact the tax bill contributed to the loss.
    Had to dispose of some of my assets to pay for the item that caused the loss.
    Can I get my loss counted as tax relief this year … pretty please?
    Please note- I’m a self funded retiree on less than median income- not a company.

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