DP World, one of Australia’s two largest port operators, has paid no tax in Australia despite generating revenue of more than $4.5bn over eight years.
A new report by the Centre for International Corporate Tax Accountability and Research (Cictar) says that DP World’s top Australian subsidiary may have “artificially reduced profits” to achieve the result.
The report, by the Cictar principal analyst, Jason Ward, said that DP World is “another example of why the Australian government, as promised, must legislate full and complete public country by country reporting for all multinationals operating in Australia”.
Tax experts are concerned that lobbying by multinationals and fear Australia could be cut off from the international exchange of tax information if its regime goes too far could see Labor water down its promise to introduce country-by-country tax reporting in July 2024.
DP World said that it fulfils its tax obligations by “paying in accordance with Australia’s tax regulations”.
“It prioritises equitable taxation, ensuring compliance with Australian tax laws and maintaining transparency with tax authorities, aligning with legal requirements of the country.”
The ATO acknowledges that there may be valid reasons that some companies pay no tax.
Speaking ahead of the release of corporate tax transparency figures in 2021, the ATO deputy commissioner Rebecca Saint said “just because an entity doesn’t pay tax doesn’t necessarily mean that there’s tax avoidance or similar activity occurring”.
“There can be good commercial justification to that,” she said.
The Cictar report analysed financial information in DP World’s annual report and Australian Taxation Office corporate taxation transparency data.
DP World Australia (Holding) Pty Ltd – its top subsidiary in Australia – “has paid zero in corporate income tax over the last eight years (2013-14 to 2020-21) while it generated $4.5bn in total revenue and holds over $2.4bn in assets”, it said.
DP World appears to be “highly profitable”, the report said, citing an average margin on earnings before interest, taxes, depreciation and amortisation of 25% in the last eight years.
Cictar identified three related party payments that “were equivalent to 120% of the 2022 operating income of DP World’s Australian port business”, suggesting that “related party debt transactions, [and] inflated management service fees” may have been used to artificially reduce profit.
DP World’s financial statements for 2022 suggest that it had not paid tax in that year because it used “previously recognised tax losses of $64m, reduced by a tax benefit of $10.1m from origination and reversal of temporary differences”.
“It is unclear exactly what this means and how it works, but previous losses have been used to eliminate current tax liabilities,” the Cictar report said.
Cictar said that DP World’s Australian ownership structure “relies on extensive use of shell companies in tax havens, including the Netherlands and the Cayman Islands” and that its parent company DP World – which is wholly owned by the Dubai government – is subject to a tax rate of 0% in its home country, the United Arab Emirates.
The International Transport Workers Federation, of which the Maritime Union of Australia (MUA) is a member, is a financial contributor to Cictar. The MUA is locked in an industrial dispute with DP World over a proposed new pay deal in Australia.
In November 2022 the ATO tax transparency report showed that almost one-third of large corporations paid no income tax in Australia in 2020-21, including more than half of the nation’s major mining, energy and water companies.
Australia’s proposed country-by-country reporting would make it a world leader in tax transparency, compelling multinationals to publish detailed location-specific information about their revenue, expenses and effective tax rate to deter profit shifting and tax avoidance.
On Thursday the assistant treasury minister, Andrew Leigh, told Guardian Australia he wants “as many countries in [the country-by-country reporting regime] as possible but without imperilling the information sharing, which is critical to the Australian tax office’s work”.
He said companies would be made to report in Australia on their operations in “probably more countries” than any other nation in the world and “a more detailed country breakdown than the European Union measures”.
