Tuesday, July 12, 2011
Rupert Murdoch may not garner as much attention for his financial savvy as he does for his journalistic escapades, which last week led to the shuttering of Britain's oldest tabloid. But that doesn't make his money management any less impressive.
Indeed, when it comes to taxes, instead of rendering unto Caesar, Murdoch has Caesar rendering unto him.
Over the past four years Murdoch's U.S.-based News Corp. has made money on income taxes. Having earned $10.4 billion in profits, News Corp. would have been expected to pay $3.6 billion at the 35% corporate tax rate. Instead, it actually collected $4.8 billion in income tax refunds, all or nearly all from the U.S. government.
Many other companies may follow similar practices but most of corporate America doesn't own one of the country's most powerful newspaper editorial pages.
How does Murdoch make money off the tax system? There are three basic elements, disclosure statements show.
One is the aggressive use of intra-company transactions that globally allocate costs to locations that impose taxes -- and profits to areas where profits can be earned tax-free. ... News Corp. has 152 subsidiaries in tax havens, including 62 in the British Virgin Islands and 33 in the Caymans. Among the hundred largest U.S. companies, only Citigroup and Morgan Stanley have more tax haven subsidiaries than News Corp., a 2009 U.S. Government Accountability Office study found.
Buying companies with tax losses is a second way Murdoch can pocket, rather than pay, taxes. ...
Third, Murdoch's tax lawyers are expert at maximizing the benefits of deferrals. Incurring a tax today, but paying it by-and-by can be profitable. ...Imagine how well Jesus might have done if he had put a corporate jet at Caesar's disposal. Or if he had a tabloid like the News of the World to put Caesar in fear of him.
Update #1: Reuters has pulled the article because it was wrong.
Update #2: David Cay Johnston Apologizes