Westfield 'leaners' take taxpayers to the cleaners

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Over the last nine years Frank Lowy's Westfield Group paid an average of 8% tax, with its Retail Trust paying 0%. Sonia Nair and Mark Chapman from Taxpayers Australia report.

THE PREVAILING SENTIMENT from the recent Federal Budget is that the “heavy lifting” that Treasurer Joe Hockey said every Australian must do was reserved for society’s most vulnerable — a claim only bolstered by a recently released report by union United Voice, which exposes the low tax rates paid by retail giant Westfield.

Conducted by senior lecturer in accounting and tax at the University of Technology Sydney, Roman Lanis, the report said the “effective corporate tax rate” that Westfield paid in the nine years leading up to December 2013 was 8% for the Westfield Group – significantly less than the current 30% company tax rate – and 0% for the Westfield Retail Trust.

United Voice said both figures fall well below the 22% estimated tax rate for the top 200 sharemarket-listed companies over the past decade — an anomaly seeing Westfield is

'... Australia’s most profitable real estate corporation and the world’s largest shopping centre owner.'

The report says Westfield is a superlative tax avoider:

'Westfield also stands out as the real estate company which has avoided the lion’s share of tax in the nine years to 31 December 2013, representing 34% of the total tax minimisation activities of the real estate sector.'

Acting national secretary of United Voice, David O’Byrne, said the research reveals that Westfield is not doing its fair share of “heavy lifting on tax”.

And the worst part, according to O'Byrne, the tax minimisation strategies are perfectly lawful:

"Tax avoidance may not be illegal, but we believe it is immoral and never more than today when low-income earners are facing a budget of across-the-board cutbacks. While some corporations are paying their tax, there are others who simply look to exploit any loophole they can.”

O’Byrne highlighted how if Westfield had paid tax at the correct statutory rate of 30%, the Tax Office would be in for additional annual tax revenues of $541 million – comprising $370 million on average pre-tax profits of $1.7 billion for the Westfield Group and $171 million on average pre-tax profits of $574 million for the Westfield Retail Trust.

Taxpayers Australia’s head of tax, Mark Chapman (the co-author of this piece), said the findings of United Voice’s report are particularly galling given the recent measures proposed by the Federal Budget.

The Treasurer was keen to stress that we all have to do the heavy lifting, but Westfield’s on-going behaviour is further proof that many large corporates simply don’t believe they have to play by the same rules as the rest of us. 

Worst of all, the Government and the tax authorities are complicit in this by failing to act to prevent this kind of blatant abuse.

United Voice is the union that represents cleaners at Westfield’s 38 shopping centres and is currently locked in a dispute with the conglomerate over the pay conditions of its cleaners.

Its report has since attracted the ire of Westfield, with spokesman Mark Ryan reportedly describing it as:

“... flawed and so obviously written to grab cheap media attention."

Well-documented instances of Westfield’s tax minimisation strategies

But it would be foolhardy to view United Voice’s latest report in isolation. Westfield has a long, chequered history when it comes to tax minimisation schemes — and not one that is confined to Australia either.

United Voice’s latest report belongs to a series of reports commissioned to explore Westfield’s global tax avoidance. Released in April 2014, Olympic Tax Dodging: Westfield’s Corporate Structure for Tax Avoidance in the UK uncovered how Westfield’s corporate structure in the UK includes a web of undisclosed subsidiaries registered in Jersey – a known tax haven.

According to the report:

'If Westfield had paid the UK corporate tax rate of 24%, it would have generated an additional £22.4 million ($40.9 million) in tax revenue in 2012 alone. The use of tax havens allows the company to shift up to 75% of their profits out of the UK.'

Westfield also employs its tax minimisation strategies in the United States. The United Voice report Westfield’s Two Faces: Community Consequences of Tax Avoidance published late last year found that Westfield avoided paying an estimated $116.4 million in U.S. property taxes in 2012 alone.

Additionally, a report published by the ReFund California Coalition in August 2013, entitled Consequences of Corporate Property Tax Avoidance, revealed that in California – where Westfield is the largest retail landlord – the retail group avoided an estimated $41 million per annum in local property taxes across the state.

The report said:

'Such additional revenues could be spent to improve public education, bolster police and fire services and generally raise the quality of public services across the state of California.'

Westfield has also attracted criticism over the disclosure and transparency of its operations, after it elected to no longer report on property values by individual property on its US holdings and to no longer disclose all of its subsidiaries.

United Voice isn’t the only one either to shed light on Westfield’s financial secrecy.

A separate report conducted by the Uniting Church last year said Westfield’s highly complex corporate structure includes more than 50 entities registered in tax havens such as Jersey but also Luxembourg and Singapore.

Its co-founder, Australian businessman Frank Lowy, has himself attracted the scrutiny of American and Australian tax authorities over his alleged use of tax shelters in Liechtenstein and Bermuda.

Revelations of Westfield’s tax minimisation strategies belong to a larger trend of huge multinationals shifting their profits elsewhere.

published late last year found that Westfield avoided paying an estimated $116.4 million in U.S. property taxes in 2012 alone.

Earlier this year, U.S. tech giant Apple was accused of shifting $8.9 billion in untaxed profits from its Australian operations to Ireland over the past decade, while Google paid just $466,802 in tax despite profits almost doubling to $46.5 million.

Mark Chapman has called for an end to government hypocrisy around tax evasion:

The government and their friends in the media feed us a steady drip of stories on a daily basis of bludgers rorting the system.

Whether it’s the unemployed, the disabled, migrants or students, there’s always a government minister or a backbencher or a tame journalist ready with an anecdote about how we’re a nation of leaners. 

And right in front of us, on a daily basis, companies like Westfield are ripping off taxpayers to the tune of hundreds of millions of dollars.  How many GP visits would that pay for? How many university places? How many training schemes for the unemployed? 

The Treasurer berates the opposition for failing to spell out what alternatives they have to fix his so-called “budget emergency”.

Well, here’s one, Joe: fix the tax system, close the loopholes and make sure that ALL taxpayers pay the tax they’re supposed to pay, at the time they’re supposed to pay it and in the place they’re supposed to pay it.

Until that happens, all the talk of the “end of the age of entitlement” is just so much hot air.

Mark Chapman and Sonia Nair work for Taxpayers Australia Inc — a non-profit non-partisan organisation providing advice to taxpayers. You can follow Mark on Twitter @mchapman_mark.

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This work is licensed under a Creative Commons Attribution-NonCommercial-NoDerivs 3.0 Australia License

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