I’ve always regarded News Corporation’s accounts as a little like Great Uncle Albert’s watch. There’s always something rattling around inside and if you shake it about enough, something interesting invariably falls out. Nothing wrong with that!
Today’s Australian Federal Court of Appeal decision is horribly complicated but essentially focuses on a 1989 meeting where execs for four different subsidiaries handed around a $3 billion cheque. The cheque ended up where it started. Just over a decade later it triggered a $A2 billion tax deduction after the $A fell against the greenback. It was an internal load between News Corp subsidiaries so there was no actual loss. But the court confirmed there was a $2 billion tax deduction. This was the original judgement last year, also mind-blowingly dense.
Today’s story (July 25 2013)
That’s the second big tax win for News Corp. Two separate internal shuffles that cost News nothing–nil-zero have given it $3.5 billion in tax deductions. Noice
Saturday 21st of July 2012: Numbers game
It’s always a happy surprise to find long-lost mementos in a bottom drawer – photographs perhaps, the odd document say, or even a $2 billion unsecured demand note.
For public companies, these little discoveries spread cheer all around, particularly if it’s two days before the end of the financial year.
On June 28, 2002, the News Ltd accountants were rummaging around the bottom of the filing cabinet when they came across documentation about a rather large US-dollar loan from one News subsidiary to another subsidiary called News Publishers Holdings
Naturally, they felt bound to repay the loan immediately. This incurred a $1.4 billion foreign exchange loss, which naturally was a tax deduction, as the Federal Court found this week, correcting a little misunderstanding by the Tax Office. Actually, News had reported another $630 million FX loss to another News company in June 2001 as well.
After News Corp reincorporated in the US in 2005, its accountants shuffled $35 billion of assets in a way that made no difference to capitalisation but created a $1.5 billion Australian tax deduction.
All up, that is $3.5 billion in Australian tax deductions from internal shuffles in Rupert Murdoch ‘s empire. It’s like a little $1 billion present from Australian taxpayers to Our Rupe, though it’s hard to locate the records of this in the News annual accounts.
Such modesty. That’s terrific work by News accountants, perhaps less terrific work by the Australian government. As government mishandling goes, it’s up there with pink batts in the ceiling and Building the Education Revolution.
There is a national newspaper that will be right onto a case of government profligacy like that.
Expect a campaign.
Saturday 03rd of July 2010 His paper money has great appeal
June 30 was a red-letter day for News Corporation’s Australian princeling, John Hartigan, beginning with a resounding win in the Federal Court of Appeal against the naysayers at the Tax Office who were trying to accuse Rupert Murdoch’s global empire of some sort of tax avoidance.
News ran into the problem back in 2005, after it had reincorporated in the US, that its US and UK operations were still owned by Australian subsidiaries which had a capital value of $39 billion. Moving them to the US could trigger a huge capital gain.
News got around this by having the subsidiary companies pay a $4 billion dividend to News Australia Holdings, then bought back their shares for $35 billion.
The dividend and the payment for the buyback were transferred to a US company which set up new holding companies in the US for $39 billion, all in the one day.
News Corp had lost nothing. Everything was the same, with a new US holding company . . . except that by paying part of the price as a dividend News was able to claim a $5 billion capital loss, which led to an Australian tax deduction of $1.5 billion.
There was absolutely no suggestion that it shaped the deal like that just to save a little money on tax, the Appeals Court ruled on Wednesday. No one could be more surprised at the result than News itself.
How much did this paper shuffling cost Australia as a tax benefit? The Prince likes to think of it as Australian taxpayers paying $567 million to see the back of Rupert Murdoch. This was loads better than the first plan, which was to buy him a gold watch