A new report released to the ABC has revealed how the
$60 billion Westfield shopping centre group does so well financially,
showing the firm's main UK company has paid only a small fraction of its
revenue in tax.
The report argues the governments of the world should crack down on tax minimising ways of big corporations like Westfield, to reduce debt and deficit.
Westfield UK operates Europe's largest urban shopping centre, but having a net tax liability of less than half a million pounds over more than a decade to 2011, it must also have one of the lowest corporate tax rates compared to its multi-billion dollar revenue over that period.
Richard Murphy runs Tax Research, a UK consultancy that does what its name suggests on behalf of charities and unions.
Westfield UK operates Europe's largest urban shopping centre, but having a net tax liability of less than half a million pounds over more than a decade to 2011, it must also have one of the lowest corporate tax rates compared to its multi-billion dollar revenue over that period.
Richard Murphy runs Tax Research, a UK consultancy that does what its name suggests on behalf of charities and unions.
"Westfield has put in place what they would call a tax-efficient structure and that must only be because they are looking to save tax," he said.
"I've been a chartered accountant for 31 years now. I reckon I've read 10,000 sets of accounts or more in my time."
Recently, he added the accounts of Westfield Shoppingtowns Ltd, the group's main UK subsidiary, to that list.
What Mr Murphy found was a labyrinthine structure.
"There is a legal entity that owns the site which is UK resident, but it actually does so on behalf of a group of Jersey property unit trusts. They're called J-PUTS for short," he said.
Mr Murphy can only think of one good reason for those layers of subsidiaries.
"Let's be blunt about it: nobody would use a Jersey property unit trust if it wasn't for a tax motive," he said.
Asked about the tax benefits of using something like a Jersey property unit trust, he says: "Well, one thing to say straight away is it does not mean that Westfield does not pay tax in the UK on its rental income in this country."
But there are other likely tax benefits, he says.
"First of all, it appears that these trusts will actually make the flow of income with a reduced rate of tax, or as low a possible rate of tax, easier for Westfield," he said.
"The second incentive is actually capital gains tax. Under current UK law there would be no capital gains tax charge because capital gains are charged on where the company is resident, not where the property is, and these companies are not resident in the UK.
"The Jersey property unit trust is not in the UK and therefore capital gain, if one is made on sale, would fall out of tax.
"And there's another advantage as well with regard to sale: the J-PUT will prevent stamp duty being paid. So there's some very strong property tax avoidance opportunities made available by using a J-PUT which the UK equivalent structures cannot provide."
Westfield Group has 54 subsidiary companies registered in Jersey
Mr Murphy has noticed one other interesting issue with the relationship between Westfield UK and the Jersey trusts.The trusts were paying for Westfield's UK shopping centre developments but the payments were often months late, meaning the UK company incurred more interest costs which it then deducted against its income for tax.
"As a result, Westfield Shoppingtowns Ltd was incurring heavy borrowing costs in the UK on which it was claiming tax relief, cancelling its profits, cancelling its tax liabilities, in that sense, as a result," Mr Murphy said.
"And the consequence of that was that the Jersey company was effectively being funded by not paying the UK company."
The global Westfield Group clearly likes Jersey's regulatory system: so much so that it has 54 subsidiary companies registered there, according to a study conducted by the Uniting Church earlier this year.
Dr Mark Zirnsak, who led that research, said: "It was a company that chose not to engage with us at all. So they offered us no explanation as to why they had subsidiaries in secrecy jurisdictions and particularly the one they made greatest use of was Jersey in the Channel Islands. So they had 54 subsidiaries in Jersey by our understanding."
Company is acting entirely within tax laws
However, both researchers say that Westfield is acting entirely within the tax laws as they exist."As far as I'm concerned, everything that has gone on here is legal. All I'm doing is drawing attention to the fact that these arrangements exist," Mr Murphy said.
Michael Crosby, the national president of the United Voice union which commissioned the report, says not everything that is legal is moral.
"The whole community benefits from the payment of tax. That's where we get government services from," he said.
"And the quality of life of the people we represent at the bottom of the labour market really depends upon whether big business pays their tax."
And he says Westfield's attitude to paying tax reflects its attitude to United Voice members, with the company failing to support the union's call for better pay and conditions for cleaners.
"Cleaners are not the voiceless people that Westfield thought they were. They've got a powerful union and we're using that power to defend them," Mr Crosby said.
In response to emailed questions from the ABC, Westfield says it has always complied with all its tax requirements in all jurisdictions.
It says it cannot offer a detailed response to any of the issues in the study until the report is released and it can view it in its entirety.
abc.net.au 16 Oct 2013
The government will never prosecute nor even try to go after their multinational colleagues, who own tens of companies linked to one retailer for the sole purpose of tax 'evasion'.
What the governments WILL do is if anyone from the general population opens accounts, this information is passed on to the relevant government, and they are dealt with accordingly.
