USA Jury orders J&J to pay $4.7 billion in Missouri asbestos cancer case to victims

(Reuters) – A Missouri jury on Thursday ordered Johnson & Johnson (JNJ.N) to pay a record $4.69 billion to 22 women who alleged the company’s talc-based products, including its baby powder, contain asbestos and caused them to develop ovarian cancer.

FILE PHOTO: A bottle of Johnson and Johnson Baby Powder is seen in a photo illustration taken in New York, February 24, 2016. REUTERS/Mike Segar/Illustration

The verdict is the largest J&J has faced to date over allegations that its talc-based products cause cancer.

The company is battling some 9,000 talc cases. J&J denies both that its talc products cause cancer and that they ever contained asbestos. It says decades of studies show its talc to be safe and has successfully overturned previous talc verdicts on technical legal grounds.

Thursday’s massive verdict, handed down in the Circuit Court of the City of St. Louis, was comprised of $550 million in compensatory damages and $4.14 billion in punitive damages, according to an online broadcast of the trial by Courtroom View Network.

J&J in a statement called the trial “fundamentally unfair” and said it would appeal the flawed decision.

J&J shares fell $1.31, or 1 percent, to $126.45 in after-hours trading following the punitive damages award. They had risen $1.52 during regular trading.

The jury’s decision followed more than five weeks of testimony by nearly a dozen experts from both sides.

The women and their families said decades-long use of Baby Powder and other cosmetic talc products caused their diseases. They allege the company knew its talc was contaminated with asbestos since at least the 1970s but failed to advise consumers about the risks.

“Johnson & Johnson is deeply disappointed in the verdict, which was the product of a fundamentally unfair process,” the company said in a statement. The company said it remained confident that its products do not contain asbestos or cause cancer.

“Every verdict against Johnson & Johnson in this court that has gone through the appeals process has been reversed and the multiple errors present in this trial were far worse than those in the previous trials which have been reversed,” J&J added, saying that it would pursue all available appellate remedies.

J&J has successfully overturned talc verdicts in the past, with appeals courts pointing to a 2017 decision by the U.S. Supreme Court that limits where personal injury lawsuits can be filed.

Of the 22 women in the St. Louis trial, 17 were from outside Missouri, a state usually regarded as friendly towards plaintiffs. The practice of combining plaintiffs in such jurisdictions, commonly criticized as “forum shopping” by defendants, will be challenged on appeal.

Mark Lanier, the lawyer for the women, in a statement following the verdict called on J&J to pull its talc products from the market “before causing further anguish, harm, and death from a terrible disease.”

“If J&J insists on continuing to sell talc, they should mark it with a serious warning,” Lanier said.

The majority of the lawsuits that J&J faces iare about claims that talc itself caused ovarian cancer, but a smaller number of cases allege that contaminated talc caused mesothelioma, a tissue cancer closely linked to asbestos exposure.

The cases that went to trial in St. Louis effectively combine those claims by alleging asbestos-contaminated talc had caused ovarian cancer.

Previous talc trials have produced verdicts as large as $417 million. But that 2017 verdict by a California jury, as well as other verdicts in Missouri, was overturned on appeal, and challenges to at least another five verdicts are yet to be determined through the courts.

The U.S. Food and Drug Administration commissioned a study of various talc samples from 2009 to 2010, including of J&J’s Baby Powder. No asbestos elements were found in any of the talc powder samples, the agency said.

But Lanier during the trial told jurors that the agency and other laboratories and J&J have used flawed testing methods that did not allow for the adequate detection of asbestos fibers.

Talc, the world’s softest rock, is a mineral closely connected to asbestos and the two substances can appear in close proximity in the earth.

Plaintiffs claim the two can become intermingled in the extraction process, making it almost impossible to remove the carcinogenic substance. J&J denies those allegations, saying rigorous testing and purification processes ensure its talc is clean.

Reporting by Tina Bellon in New York; editing by Leslie Adler and Rosalba O’Brien

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Henry Sapiecha

Probably Apple will become the world’s first trillion-dollar company this year

During the dot-com-crazed 1990s, Cisco Systems became the world’s most valuable company. By many it was expected to become the first company to hit a trillion-dollar market value, it made it barely halfway there. When the technology sector peaked in March 2000, Cisco had a capitalisation close to $US550 billion.

From those glory days, the entire technology sector imploded. Cisco fared even worse than the Nasdaq, losing 87 per cent from its zenith to its nadir. Today, some 18 years later, Cisco is worth about $US221 billion ($277.7 billion); its average annual compounded returns from those lofty heights is a negative minus 2.17 per cent per year, including reinvested dividends.

The world, it seems, would have to wait a while for its first true trillion-dollar market capitalisation company.

I was discussing this with a friend earlier this week. Apple is inching toward that trillion-dollar mark (its valuation hovers around $US900 billion). Prior to the recent 12 per cent market swoon, Apple had been trading at an all-time high of $US180.10 per share. As of this week, it eclipsed that, recovering all of that February drawdown.

The trend suggests that sometime this year, Apple will become America’s first trillion-dollar company. What will drive the move to a trillion dollars?

Consider these four factors as key to Apple’s continued upward momentum:

1. Share repurchases: Since 2012, when management first announced its intentions to do big share buybacks, Apple has shrunk its outstanding publicly traded shares considerably. As of 2013, there were 6.6 billion shares available to the public. Today, that count stands at a little over 5.07 billion shares – a 23.2 per cent reduction.

Apple’s board of directors had most recently authorised a $US210 billion share-repurchase program that is expected to be completed by March 2019, according to Apple investor relations. That was before the very corporate friendly 2017 tax reform bill was passed. One would expect that bill will encourage even more share repurchases. We should not be surprised to see a 10 or even 20 per cent share count reduction over the next five years.

What is the effect of reducing share count? It makes the earnings of each share greater proportionately. At the same price, higher earnings equal a lower price-to-earnings ratio, and the company appears cheaper. This could have the impact of enticing value buyers, including…

2. Warren Buffett: The famous value investor has been notoriously tech averse throughout his career. His recent announcement that he is out of IBM and into Apple in a big way surprised a few people.

SANTA MONICA, CA – SEPTEMBER 6: Amazon CEO Jeff Bezos unveils new Kindle reading devices at a press conference on September 6, 2012 in Santa Monica, California. Amazon unveiled the Kindle Paperwhite and the Kindle Fire HD in 7 and 8.9-inch sizes. (Photo by David McNew/Getty Images)

Buffett said Apple is now Berkshire Hathaway’s second biggest holding (after troubled serial fraudster Wells Fargo); Apple was the stock Buffett’s investment firm bought the most of in 2017. Although he claims he still has confidence in Wells Fargo, he cut his stake last year; don’t be surprised to see Berkshire’s Wells holdings get further reduced.

Buffett’s loyal devotees often follow his lead, and are likely to add Apple to their portfolio of value stocks.

3. Index buyers: The past decade has seen indexing go from a modest niche to one of the most popular styles of investing. The explosive gains in assets under management for Vanguard ($US5 trillion) and Blackrock ($US6 trillion) attest to the power of passive investing.

Apple is the biggest company in the Standard & Poor 500, the Nasdaq 100 and the Dow Jones Industrial average — three of the best-known, most-followed indices. As such it captures the flow into index holdings, whenever markets rise. Apple accounts for almost 4 per cent of the S&P 500 (its market cap is about $US23 trillion); 4.9 per cent of the price-weighted Dow; and over a whopping 11 per cent of the Nasdaq 100 ($US7.85 trillion).

4. New products: A slew of new and upgraded products are in the making. These usually direct the next cycle in Apple’s revenue, profits and ultimately price. New services, iPhones, AirPods, wireless chargers, over-the-ear headphones and home devices could be the spark that adds the next $US100 billion in market cap.

I know, there are skeptics. There has been lots of skepticism about Apple for literally decades. The Mac site Daring Fireball has kept a running list of “claim chowder” — all of the bad reviews of iPhones, iPads, Apple Watches, etc. that (incorrectly) forecasted disastrous sales. I see no reason this time is any different.

What factors could derail seeing a huge T in Apple’s market capitalisation? Two quickly to mind:

The market not falling in line: We tend to forget that the overall market and a company’s sector are responsible for about two-thirds of its gains. If tech falls out of favour, or if the overall market rolls over, it will put a trillion dollars out of reach for Apple.

Apple comes in second: The most likely challenger in the race to a trillion would be Jeff Bezos and Amazon.com. It has a market cap of $US732 billion dollars — and an infinitely higher valuation — so it has a tougher road to travel. But I would not put anything past Bezos & Co., and it would not be the first time they saw a 35 per cent gain in a year.

Cisco jinx be damned, I predict a better than 40 per cent chance that Apple’s trillion-dollar valuation will occur this year.2018.

Bloomberg

www.money-au.com

Henry Sapiecha

Almost unknown start-up Meituan Dianping smashed into a $30 billion valuation

China’s Meituan Dianping just became the world’s fourth-most valuable start-up, reaching a $US30 billion ($38 billion) valuation that puts it ahead of high-fliers like Airbnb and Space X.

Never heard of Meituan? You’re not alone. The Beijing-based company, led by Wang Xing, is almost unknown beyond its home country. It delivers food to people’s homes, sells groceries and movie tickets, provides reviews of restaurants, and markets discounts to consumers who buy in groups. It’s a sort of mashup of Groupon, Yelp, Foodpanda and Uber Eats.

Meituan’s appeal for investors is its dominant position in a market of more than a billion people. It was formed through the 2015 merger of Meituan.com and Dianping.com, creating the leading player for internet-based services ordered via smartphone apps. It raised $4 billion in the latest round from Tencent Holdings, Sequoia Capital and US travel giant Priceline Group.

“It’s a quasi-monopoly built on the stomachs of 1.4 billion people,” said Keith Pogson, global assurance leader for banking and capital markets in Hong Kong at consultant EY.

Flipping smart $4 billion funding round by Meituan

Wang started Meituan.com in 2010 as a group-buying site similar to Groupon, where people can get discounts by buying electronics or restaurant meals together. Dianping was founded in 2003 in Shanghai with reviews of restaurants and other local businesses, then diversified into group discounts. The companies were valued at $US15 billion when they merged two years ago.

Meituan Dianping delivers food to peoples homes

www.foodpassions.net

The combined companies have far surpassed their US peers. Chicago-based Groupon, once a sensation in the US, has dropped to a market value of less than $US3 billion. Yelp, based in San Francisco, has tumbled from its peak in 2014 to $US3.6 billion.

Meituan Dianping has expanded well beyond its original businesses. With a few taps to navigate its smartphone apps, Chinese customers can order hot meals, groceries, massages, haircuts and manicures at home or in the office. One popular service offers the ability to have your car washed while you’re at work and it’s parked on the street – the service sends a photo to your phone to verify the job. Meituan says it now has 280 million annual active users and works with 5 million merchants.

The offerings, collectively known as online-to-offline or O2O services, may ultimately prove more successful in China than in the US. Labor costs are lower in China, cities are more densely populated and there are more people. The country’s O2O market surged 72 per cent to 762 billion yuan ($US115 billion) last year, according to estimates from consultant IResearch.

“China’s market is big enough for a company this size,” said Wang Ling, an analyst with IResearch. “After years of consolidation, Meituan is one of the few contenders in areas with gigantic revenue.”

Meituan is facing increasingly stiff competition from China’s technology giants and their proxies. In particular, Alibaba Group Holding has backed a rival service called Ele.me, which recently acquired Baidu’s business, Waimai. Alibaba, Tencent’s primary rival, is boosting its investment to bankroll expansions into more cities and businesses.

“Meituan faces so many competitors because of its wide range of business,” said Cao Lei, director of the China E-Commerce Research Centre in Hangzhou. “Lifestyle e-commerce, which includes online travel and dining reservations, is one of the fastest growing sectors in the country.”

Travel is becoming the latest competitive ground. With the recent fundraising, Meituan plans to spend hundreds of millions of dollars over the next three to five years to become a leading travel booking site. It’s also exploring opportunities to collaborate with Priceline as part of the investment. That may present a challenge to China’s biggest online travel site, Ctrip.com International, which is backed by Baidu. Ctrip shares fell 8.2 per cent in US trading.

It’s a quasi-monopoly built on the stomachs of 1.4 billion people.

 

China’s tech titans take their battle to a new frontier

In the latest funding, Meituan also received money from Canada Pension Plan Investment Board, Trustbridge Partners, Tiger Global Management, Coatue Management and the Singaporean sovereign wealth fund GIC. Meituan said it would use the cash to expand in artificial intelligence and drone-delivery technology.

Meituan is one of the new generation of Chinese technology companies that has rapidly gained popularity thanks to the rise of smartphones. Where Baidu, Alibaba and Tencent have come to be collectively known as BAT, new media upstart Jinri Toutiao, Meituan Dianping and ride-sharing king Didi Chuxing have now earned their own acronym: TMD.

The $30 billion financing ranks the company fourth in the world in start-up valuations, according to CB Insights. The first three are Uber Technologies, Didi and Chinese smartphone maker Xiaomi Corp.

EY’s Pogson however cautioned that valuations in China may be getting a bit overheated. Shares of private companies like Meituan and Uber aren’t traded in liquid markets every day, so valuations change only rarely and typically go up. In addition, many of the fundraisings in China and the US are done with ratchets, or protections so that investors get compensation if the valuations fall later on.

“You have to take these numbers with a grain of salt,” he says.

Bloomberg L.P.

Henry Sapiecha

Jack Ma Asia’s richest man has his net worth soar US$2.8b in a day

Alibaba executive chairman Jack Ma, attends the annual meeting of the World Economic Forum in Davos, Switzerland, Jan 18, 2017.

HONG KONG (BLOOMBERG) – Mr Jack Ma’s net worth surged US$2.8 billion (S$3.87 billion) overnight as Alibaba Group Holding forecast sales growth that topped every analyst’s estimate, despite China’s decelerating economy.

Mr Ma, 52, is now the richest person in Asia and 14th wealthiest in the world, according to the Bloomberg Billionaires Index. His net worth has climbed US$8.5 billion this year to US$41.8 billion.

The latest surge came after China’s largest e-commerce company forecast 45 per cent to 49 per cent revenue growth in the year ending March, demonstrating how investments beyond online shopping are paying off. Shares in Alibaba, where Mr Ma is chairman, rose 13 per cent to a record high

Alibaba and Tencent Holdings – which dominate online shopping and social media, respectively – have ventured further into new areas, from cloud computing services to streaming music and video, as the country’s economy slows. Alibaba is capturing more digital advertising spending by incorporating social elements such as video in its shopping sites.

Alibaba is holding meetings with investors this week. Mr Ma is scheduled to appear on Friday (June 9) to discuss the company’s initiatives.

Henry Sapiecha

Warren Buffett’s Berkshire invests $US1 billion in the Apple group.

Warren Buffett’s Berkshire Hathaway Inc on Monday revealed a new stake in Apple Inc, in a bet that the stock’s price could rebound after iPhone sales fell for the first time.

Berkshire held 9.81 million Apple shares worth $US1.07 billion ($1.47 billion) as of March 31, according to a regulatory filing detailing most stock holdings of Buffett’s Omaha, Nebraska-based conglomerate.

It is unclear whether the Apple investment was made by Buffett or by one of his portfolio managers, Todd Combs and Ted Weschler, who each invest about $US9 billion.

apple corp building logo image www.profitcentre.net

Apple shares look ‘stunningly cheap’: Wallman Investment Counsel founder Steve Wallman.

Buffett typically makes Berkshire’s multibillion-dollar investments, while Combs and Weschler make smaller wagers.

The investment deepens Berkshire’s commitment to the technology sector, which Buffett has largely shunned apart from a big stake in International Business Machines Corp, which grew slightly in the first quarter.

Apple last month reported its first quarterly decline in revenue in 13 years as an increasingly saturated market hurt iPhone sales.

apple share chart image www.profitcentre.net

Apple shares have taken a beating over the past month.

Chief Executive Tim Cook is looking to develop other technologies, and last week unveiled a $1 billion investment in Chinese ride-hailing service Didi Chuxing.

Shares of Apple have fallen by nearly one-third since April 2015. They were up $US2.13, or 2.4 percent, at $US92.65 in Monday morning trading, likely because of Berkshire’s imprimatur.

“The stock is stunningly cheap, and it has a massive pile of cash,” said Steve Wallman, founder of Wallman Investment Counsel in Middleton, Wisconsin, who has owned Berkshire since 1982 and Apple since 2003. “Apple is not getting credit for research and development it is doing behind the scenes, which will eventually show up in new products.”

An Apple spokeswoman did not immediately respond to requests for comment.

Despite his aversion to technology sector, Buffett told CNBC on Monday, he offered to help Dan Gilbert, the chairman of Quicken Loans and owner of the Cleveland Cavaliers basketball team, finance a bid for Internet company Yahoo Inc.

Reuters first reported Buffett’s support on Friday.

The Apple investment may have been made with proceeds from the sale of AT&T Inc stock, as Berkshire exited what had been a $US1.6 billion stake in the quarter.

Berkshire’s investment also puts it at odds with investors that have retrenched from Apple.

Last month, billionaire activist investor Carl Icahn said he sold his entire Apple stake, on concern that China could make it harder for the company to do business there.

David Tepper’s Appaloosa LP also shed his Apple stake in the first quarter, while Ray Dalio’s Bridgewater Associates cut its investment by two-thirds.

In Monday’s filing, Berkshire also reported higher stakes in Bank of New York Mellon Corp, Deere & Co and Visa Inc, and lower stakes in MasterCard Inc and Wal-Mart Stores Inc.

Reuters

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Henry Sapiecha

LARGEST REVENUE EARNING COMPANIES IN THE WORLD SHOWN AS AN INFOGRAPHIC

MILLIONS of $$ BANK NOTES IN PILE IMAGE www.profitcentre.net

This chart shows Largest Companies by Revenue.

A company is an association or collection of individuals, whether natural persons, legal persons, or a mixture of both. Company members share a common purpose and unite in order to focus their various talents and organize their collectively available skills or resources to achieve specific, declared goals.

The largest public, state-owned, and private businesses by its consolidated revenue. The list is limited to companies with annual revenues exceeding $110 billion US. The most common industry is oil and gas, with nearly one third being classified as such.

The availability and reliability of up-to-date information on prior state-owned companies is limited and varies from country to country, thus this list may be incomplete. This list is shown in U.S. dollars, but many of the companies on it prepare their accounts in other currencies. The dollar value of their revenue may change substantially in a short period of time due to exchange rate fluctuations.

STUDY

Henry Sapiecha

Largest Companies by Revenue

Shifting sands: push for government to crack down on corporate profits

tax apple google twitter logo image www.profitcentre.net

Australia is now facing calls for a parliamentary inquiry into profit-shifting of its own.

Antony Ting describes it as “like finding treasure”. It was 18 months ago when the powerful US congressional committee blew the lid on Apple’s aggressive corporate tax structure, which allowed it to funnel $US44 billion dollars out of the countrythrough a network of tax haven subsidiaries.

Dr Ting, a senior tax lecturer at the University of Sydney Business School, had spent years trying to unravel the complex tax avoidance strategies of multinationals.

“All this information suddenly came out,” he recalls.

flying bag of money grab sketch image www.profitcentre.net

By forcing Apple to release and explain its global accounts, the hearings exposed for the first time the tactics that allows the tech giant – and other corporations – to successfully avoid paying tax on billions of dollars earned every year in the world’s biggest economies.

It also added steam to a global crusade against rich companies shifting profits overseas, avoiding the hands of tax authorities and depriving cash-strapped governments of much-needed revenue.

Australia is now facing calls for a parliamentary inquiry into profit-shifting of its own, with the opposition, Ting and advocacy groups saying it could help expose the tax minimisation tactics of companies operating here.

flying_money sketch image www.profitcentre.net

The calls come as Australia gears up to host the high-powered G20 finance ministers meeting, kicking off on September 18 in Cairns, where its efforts to tackle tax avoidance strategies will come under international scrutiny. That meeting is a precursor to the all-important G20 Leaders Summit in Brisbane in November.

Part of the G20’s agenda is to modernise the international tax system to keep pace with the way companies now do business.

Prime Minister Tony Abbott has pledged to have a “frank” discussion about the impact of digitalisation on tax revenues at the meetings in November. In January, at the World Economic Forum in Davos, he noted that “different national tax arrangements have not always kept up with the rise of services and the pervasiveness of digital technologies” .

So, the G20 will continue to tackle businesses artificially generating profits to chase tax opportunities rather than market ones,” he said.

The government stepped up its rhetoric on Thursday this week, with Treasurer Joe Hockey warning that the government would not stand “idly by” while multinationals avoided tax.

Hockey revealed he had asked Tax Office commissioner Chris Jordan to “double his efforts” and undertake more extensive inquiries and audits of multinational companies.

“As the Prime Minister and I have both previously said, you should pay tax in the country where you’ve earned a profit. That’s not just an essential tax principle, it is rational and fair,” Hockey said.

There is stark evidence that Australia’s corporate tax base is being eroded, with the burden of revenue falling increasingly heavily on individuals.

The proportion of income tax collected from business in Australia has shrunk over the past five years, falling from 23 per cent in 2007-08 to 19 per cent in 2012-13, according to the Australian Bureau of Statistics.

At the same time, the proportion of income tax collected from individuals rose from 37 per cent to 39 per cent.

Mr Jordan has estimated the government is losing up to $1 billion a year because of the tax minimising strategies of multinationals. Most of that is being lost, he says, due to weaknesses in the present tax system – and its failure to adapt to modern, globalised businesses with flexible arrangements.

The list of companies being exposed for their use of “flexible” cross-border strategies is long and ever-growing.

Airbnb is the latest company to admit that every dollar spent on its website in Australia is booked through an Irish subsidiary, despite the company’s new chief executive, Sam McDonagh, revealing that Australians were among the most prolific users of the popular apartment-sharing website.

“We do everything we can to comply with all the taxation requirements in Australia,” Mr McDonagh  said in an interview last week.

Google has pointed to the $15 million it pays in payroll and other taxes in Australia as part of its investment in the local workforce.

Similarly, an Airbnb spokeswoman says it contributed “$214 million in economic activity in one year in Sydney” by filling local suburbs with overseas tourists.

Fairfax Media has revealed that Swedish furniture chain IKEA paid just $8.3 million in local tax expenses last year on an operating profit of $92 million.

Most multinational tech companies operating in Australia are able to reduce their local tax bills substantially by billing through subsidiaries in low-tax jurisdictions, such as Singapore or Ireland.

This cat-and-mouse game is kept alive by the determination of low-taxing nations to remain competitive.

Ireland says its 12.5 per cent corporate tax rate helps it attract leading companies to set up on its shores and employ local people.

On a recent trade mission to Australia, its jobs minister, Richard Bruton, said the affairs of multinationals was “not an Irish issue”. “We believe that it is perfectly legitimate to have a low corporate tax rate,” he said.

Apple and Google have stolen the most headlines for these tactics. After deductions, the latter paid just $460,000 in tax expenses in Australia in the past financial year despite doubling its local profit to $46.5 million. And the practices are not confined to the tech industry.

“This is not just about Google hiding within the digital ether, but agribusiness and mining corporations too,” says Oxfam Australia chief executive Helen Szoke.

“They employ similar accounting tactics and avoid paying their fair share, and this is devastating to developing country budgets.”

Tax Office deputy commissioner Mark Konza has told the Centre for Economic Development of Australia that the agency is ramping up its focus on companies with “footloose”, or mobile, assets.

tax money image www.profitcentre.net

Part of this crackdown involved audits of high-tech companies that were suspected of breaching the law.

On Thursday, Jordan said the agency was looking specifically at the tech sector to examine whether companies were correctly reporting their income. “I appreciate the Treasurer’s encouragement to do more in this area and his statement reinforces the importance of our current work program,” he said in a statement.

But while governments – including Australia’s – are talking tough, some have doubts about the capacity or willingness of leaders to act on profit shifting and tax avoidance at this year’s G20 Leaders Summit in Brisbane.

Observers say the federal government’s record so far in tackling profit shifting has been mixed.

Even as Hockey, in his speech on Thursday, revealed he had asked the tax commissioner to “double his efforts”, he is simultaneously cutting the Tax Office’s staff by 10 per cent over the next 12 years. The agency lost 900 staff last year.

Hockey’s speech on Thursday outlined the government’s work to plug some of the loopholes being exploited by companies. But much of the work involves measures already announced, including changes to thin capitalisation rules that came into effect in July.

These rules are designed to prevent multinationals from profit shifting by allocating a disproportionate amount of debt in their Australian operations, claiming debt deductions in Australia and thereby reducing their Australian taxable income.

The changes, which reduce the “safe harbour” debt limit from 75 per cent to 60 per cent, were derived in part from Labor’s $4 billion multinational tax package, announced before it lost government.

Labor says about $1 billion worth of these measures are yet to be implemented.

The Tax Office is also ramping up its involvement in automatic exchange of information with tax authorities overseas. This involves sending financial information to international regulators in a bid to catch wealthy tax cheats.

But the opposition says cuts to the Tax Office undermined efforts and leave it “woefully underpowered” in the fight against big firms.

DOLLAR SIGN IN AUSTRALIAN FLAG DESIGN IMAGE www.ozrural.com.au

Labor’s assistant treasurer and former economics professor Andrew Leigh says the government’s failure to implement the rest of Labor’s reforms will mean multinationals will still be able to avoid more in tax than is being saved by many of the budget’s welfare tightening measures.

These reforms relate to delays in reforming Australia’s offshore banking regime, third-party compliance reporting and discrepancies between the tax footing of multinational corporations and domestic companies.

According to budget papers, they would amount to savings of $1.13 billion.

Dr Leigh accuses  the government of letting multinationals off the hook at a time when it is asking low-income earners to make significant sacrifices as part of its tough budget. “It flies in the face of the Treasurer’s rhetoric around the age of entitlement needing to end, and all of us needing to do the heavy lifting,” he says.

And Ting points to the government’s hesitation to stand by tougher transparency measures introduced under Labor, which will force the top 200 companies in Australia to publish the amount of tax they pay starting from July next year.

While Finance Minister Mathias Cormann has said he would retain these laws, tax experts said a repeal has been considered.

As well as clamping down on thin capitalisation schemes, the government says it is closing another loophole known as hybrid mismatch arrangements, which allow companies to flout tax by exploiting the differences in the treatment of entities or transfers between two or more countries.

The changes, which reduce the “safe harbour” debt limit from 75 per cent to 60 per cent, were derived in part from Labor’s $4 billion multinational tax package, announced before it lost government.

Labor says about $1 billion worth of these measures are yet to be implemented.

The Tax Office is also ramping up its involvement in automatic exchange of information with tax authorities overseas. This involves sending financial information to international regulators in a bid to catch wealthy tax cheats.

But the opposition says cuts to the Tax Office undermined efforts and leave it “woefully underpowered” in the fight against big firms.

Labor’s assistant treasurer and former economics professor Andrew Leigh says the government’s failure to implement the rest of Labor’s reforms will mean multinationals will still be able to avoid more in tax than is being saved by many of the budget’s welfare tightening measures.

These reforms relate to delays in reforming Australia’s offshore banking regime, third-party compliance reporting and discrepancies between the tax footing of multinational corporations and domestic companies.

According to budget papers, they would amount to savings of $1.13 billion.

Dr Leigh accuses  the government of letting multinationals off the hook at a time when it is asking low-income earners to make significant sacrifices as part of its tough budget. “It flies in the face of the Treasurer’s rhetoric around the age of entitlement needing to end, and all of us needing to do the heavy lifting,” he says.

And Ting points to the government’s hesitation to stand by tougher transparency measures introduced under Labor, which will force the top 200 companies in Australia to publish the amount of tax they pay starting from July next year.

While Finance Minister Mathias Cormann has said he would retain these laws, tax experts said a repeal has been considered.

As well as clamping down on thin capitalisation schemes, the government says it is closing another loophole known as hybrid mismatch arrangements, which allow companies to flout tax by exploiting the differences in the treatment of entities or transfers between two or more countries.

logo_australia_blue image www.profitcentre.net

Likewise, the US congressional hearings followed a detailed expose of Apple’s tax minimising strategies in the pages of The New York Times.

Ting is calling for an Australian parliamentary inquiry into the profit-shifting practices of multinationals, in the hope that it could prove as revelatory as those in Britain and the US.

“The last thing that practitioners would like to have is full transparency,” he says. “The more information the public has, and the ATO has, the better it is for the government.”

Changes to the law could give the Tax Office more powers to investigate, he says.

But the government has so far shied away from moves to introduce country-by-country reporting, which tax experts say is crucial in lifting the lid on where companies are hiding money offshore. Country-by-country reporting would force companies to publish a breakdown of their operations in each country in which they operate, including employee numbers, assets, sales, profits, and taxes, due and paid.

The government has also been criticised by Transparency International, a global anti-corruption group, for consulting with business before committing to a deal on the automatic exchange of information between it and other jurisdictions around the world.

On Thursday, the Treasurer said the Cairns meeting would review governments’ progress on country-by-country reporting, as well as other harmful tax practices.

It also firmly committed to a common reporting standard for automatic exchange of information.

Mark Zirnsak, a director of the Justice and International Mission of the Uniting Church Synod of Victoria and Tasmania and a representative of the Tax Justice Network, welcomed the commitment and encouraged the government to consider further measures to address profit shifting, including introducing a public registry of the ultimate owners of companies and trusts, and introducing legislation to protect and reward whistleblowers who expose corporate tax evasion and tax avoidance.

“This has been very significant in breaking through the tax evasion operations that were run by Swiss banks for US citizens,” he says.

Oxfam’s Szoke says the G20 should be actively promoting worldwide tax transparency by requiring multinational corporations to make country-by-country reports publicly available.

“This would have a deterrent effect and also assist with tackling tax avoidance in developing countries where tax authorities have limited capacity,” she said.

Meanwhile, advocacy group ActionAid urged the government to consider the impact of tax dodging on developing countries – not just Australian taxpayers.

“If this government is serious about protecting the interests of developing countries, they must lead further reform,” its Australian executive director Archie Law said.

Ting says it is a good time for Australia to consider whether it is worth having a US-style inquiry to grill multinationals about their operations here.

“If we had that committee, we could find out, for example with Apple, exactly what transactions Apple Australia has had with other related parties and all their financial statements,” he says.

Henry Sapiecha