Tax Inquiry: News Corp boss grilled over tax allegations, accuses Fairfax of ‘relentless’ attack

The CEO of News Corp Australia has been questioned about whether Australia’s largest newspaper publisher siphoned some $4.5bn of revenue from its Australian business virtually tax-free over two years.

Appearing before a Senate inquiry on corporate tax avoidance, Julian Clarke addressed the allegations head-on, after they were first aired in the Fairfax newspapers on Monday, saying: “We want to pay… we must pay… the right amount of tax. No more and no less.”

Clarke, along with News’s Australian chief financial officer Susan Panuccio, faced more than 40 minutes of questioning by Senators who questioned the legality of arrangements in which billions of dollars were repatriated to overseas companies within the News Corp group.  

Screen Shot 2015-04-08 at 4.07.06 pmUnder questioning from Greens Senator Christine Milne, Panuccio said $4.5bn had been repatriated but argued the transaction was more complicated than had been reported and said it was a legal and legitimate transaction.

Asked by Milne: “Was $4.5bn repatriated last year?” she said: “No… well yes $4.5bn was repatriated but it happened in two years… it was a reduction in the equity value here but it was a movement of shares. Shares that belonged to the company that is now 21st Century Fox. There were no tax implications.”

Fairfax’s story had accused News Corp of describing the repatriation as a “return of capital” to its New York parent but was in effect Australian profits being move off-shore.

However it is understood that News Corp believes $3.2bn of the repatriation was accounting treatment that relates to the split of the company into News Corp and 21st Century Fox, a movement of shares necessary to give effect to the split of News Corp into separate publishing and entertainment arms. 

The other $1.3bn relate to a remittance of cash to the US, the bulk of which related to tax reimbursement (plus interest), following a ruling by the full bench of the Federal Court in Australia.

News Corp last night declined to answer questions arising from Clarke and Panuccio’s evidence about the details of this repatriation and in particular which country and which News Corp subsidiary it went to.

It came after some fiery evidence from Clarke, with the CEO telling Senators:“We have been subject to relentless attack by Fairfax.”

“These comments are intentionally misleading, or they don’t have a clue, and in the case of the author probably both. We are of course demanding a correction and will see if that is forthcoming.”

Sydney Morning Herald editor Darren Goodsir last night declined to comment on Clarke’s statements but it is understood that the publisher stands by its story, although one line of the original online version of the story has been removed.

News Corp also revealed that it had seven businesses operating in tax havens but said three are in Luxembourg and three in Hong Kong, where they are subsidiaries of REA which operates in both those countries.

REA owns the largest real estate website in Luxembourg and one of the biggest in Hong Kong while the seventh is the result of it buying Consolidated Media Holdings. The publisher says the company is dormant and that they are in the process of closing it down.

Clarke’s evidence also saw him enter a tense war of words with Greens leader Milne over why the publisher choses to continue publishing national broadsheet The Australian despite losses as high as $30m a year.

“The issue is you run The Australian at a loss and I’m asking why do you continue it as a business when it is not profitable”, asked Milne.

“Because we think it is a very important part of our total business,” replied Clarke. “I make no apologies for that. The Australian is actually a very important part of our total newspaper operation and journalistically I think it is very very important inside Australia.

“We think that this nation of ours needs a very strong national newspaper like The Australian to do exactly what it is doing… which is absolutely involved in policy. In understanding the parties that are operating and the policies they bring to the fore.

Screen Shot 2015-04-08 at 4.00.15 pm“If for some reason The Australian was no longer there then there would be no one doing what we are doing…  Senator (Milne) we have a difference of opinion over why we are doing it. Every time you tell me we are trying to do this to run tax losses I will tell you that we are not.”

Milne then fired back: “I accept you are doing it for an ideological purpose.”

Invited by inquiry chair Senator Sam Dastyari to give his views on the tax arrangements of the likes of Google and Netflix Clarke took aim at its online rivals focusing on the GST and the issue of overseas operators being exempt.

He claimed the likes of Google and Netflix were creating an “unlevel playing field that we feel passionate about”.

“Netflix have just come into this country. They have been able to price themselves below the company that we have, which is Presto. But it’s not just us – it’s also the Fairfax joint venture with Nine (Stan).

“We would be looking to Parliament to fix that problem,” said Clarke. “If the GST isn’t applied here and it allows a foreign company to come here and have a lower operating cost base then clearly it’s not a level playing field.”

Nic Christensen 


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