Bermuda Cited In Murdoch Tax Scheme
According to a report in “The Sydney Morning Herald”, Rupert Murdoch‘s News Corporation — the parent company of Fox News — has been forced to pay the Australian Capital Territory government $77 million in taxes and penalties after an alleged tax avoidance scheme involving a company listed on the Bermuda Stock Exchange unravelled.
The payment was reportedly “noted in the [Australian Capital Territory] mid-year budget update as duties on ‘shares and marketable securities’.”
Australian-born media baron Mr. Murdoch [pictured] is said to have paid the money late last year in a secret settlement, two years after his multinational News Corporation was taken to court by ACT’s tax authorities who had originally demanded $84 million.
“The money will allow the territory to present an almost balanced budget this financial year and represents a stunning victory by the nation’s smallest jurisdiction over the international corporate giant, which reported revenue of nearly $4 billion in 2009-10,” reported the Australian newspaper.
News Corporation did not include the massive tax and penalty payment in its December quarter update. A company spokesman said yesterday that the case had been settled confidentially and declined to comment further.
The ACT government is also refusing to talk about the money, citing tax laws.
“But [official] documents reveal a four-year investigation by Treasury Commissioner for ACT Revenue Graeme Dowell and his officials,” said the “Sydney Morning Herald”. “The papers outline how they untangled a complex web of transactions between Murdoch-controlled companies that stretched through Victoria, Queensland and the tax haven of Bermuda.
“In 2004 the territory claimed it was owed duty on the transfer of nearly $9 billion worth of shares of a former territory-registered Murdoch company, Karlholt, in a restructure of the media mogul’s empire. The ACT initially issued its tax demands in March, 2008 to News Corporation with a duplicate demand to another Murdoch company, News Australia Holdings.”
The territory said it was owed $53 million in unpaid transfer duties and $5 million interest. Authorities said that Karlholt on the Bermuda Stock Exchange, once it became clear the ACT would pursue the money, was a tax avoidance scheme that attracted $26 million in penalties. The Tax Commissioner alleged the Bermuda move was an attempt to take advantage of a loophole exempting shares on listed companies from transfer duties.
Karholt is Mr. Murdoch’s personal investment vehicle. When the holding company for the Murdoch  family’s multi-billion dollar media investment was listed on the Bermuda Stock Exchange [BSX], London’s “Daily Telegraph” remarked it “was not a conventional float.”
“Only 10 shares were issued, each worth about £380 million, with no intention of any trading taking place,” said the British newspaper. “The object was simply for the Murdoch family to avoid taxes when the company they control, News Corporation, changed domicile from Australia to the US several months ago.”
News Corporation originally claimed it owed no tax to ACT and said any legal action would be ”resisted strongly”. It also described the taxman’s attempts to recover the money as an ”improper exercise”.
But that resistance quietly came to an end late last year with the handover of $77,551,000. .
It was alleged that News Corporation made several attempts to avoid the duty, said the “Sydney Morning Herald”, first by unsuccessfully applying to transfer the company’s registration to Victoria and then by applying for a waiver on 95 per cent of the dutiable amount. After that failed, the Bermuda move was made.
In a March 20, 2008 letter to the company, ACT Revenue Commissioner Dowell said: ”I am satisfied that the listing of Karlholt on the BSX and the transfer of Karlholt shares were part of a tax avoidance scheme … that benefited News Australia Holdings Limited.”
