I give up… Media and tax reform

To the Fairfax and ABC media screaming that corporates dont pay enough tax, here is a lesson that is pitched for those with limited desire to investigate – i.e. Journalists.

Bill Pty Ltd runs a petrol station. He buys 2 million litres of fuel each year. He buys it at $1.50 and sells it at $1.53 (10 years ago when I last had a fuel station client markups were 2%). His turnover is $3 million dollars. His electricty and repairs and… is $10,000.

So how much tax does the ABC and Fairfax think he should pay. 30% of his turnover – being $900,000.

Well that is what they want Apple to pay. “How can Apple Australia only pay  $80 million in tax on $6 billion turnover?” They ask… The answer is you dont pay tax on turnover!!!!

Poor Bill has a turnover of $3 million but after he pays for the fuel to sell, and his costs he only has $50,000 to pay the owner who had to work every day as he could not afford staff. And what tax does this evil tax dodger pay on its $3 million turnover? A mere $15,000. That is a rate (tax to turnover) of 0.5% (Barry Cassidy has just had a heart attach and Michael West is in a fit!).

If the PROFIT is only $50,000 then $15,000 tax is appropriate.

Apple Australia is merely a reseller of Apple products, deigned by Apple US and made by Apple Singapore. Its mark up (profit % on coat of goods) is almost identical to other resellers like JB HiFi.

So having a turnover of $6 billion is irrelevant. What is the profit? About the same as JB HiFi (as a percentage of sales)…

Grow up and inform us journalist.

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About Ken Mansell

As a stay at home Dad most of the week this is my way of pretending I am still the tax counsel of ASX and SEC listed companies, working at big 4 firms, working at the Federal Treasury, on the Henry Review and at Parliament House for the previous government.
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