The Daily Telegraph and The Australian, two major news providers owned by Rupert Murdoch’s New York-based News Corp. (NASDAQ:NWSA), launched media campaigns against government deficit spending late last year while at the same time their parent company received the single-largest payout from the Australian taxpayer ever received by a corporation.
Dispute over the windfall payment, which was outlined in New Corp.’s fiscal second-quarter earning report earlier this month, was playing out behind the scenes during the country’s federal elections last September. While the country’s Tax Office was mulling appealing Federal Court of Appeal ruling on the payment, News Corp’s media outlets were upping their campaigns against the Labor Party for spending more than the government brings in. Labor lost 17 seats in the House of Representatives to the Liberal/National coalition.
Australia’s Financial Review explained in a report Monday morning how News Corp. managed to wrestle nearly $800 million from the Australian taxpayer:
“The galling feature for the Tax Office is that the original deals that cost taxpayers $882 million [Australian dollars] cost News nothing. In a 1989 meeting, four News Corp. Australia executives exchanged cheques and share transfers between local and overseas subsidiaries that moved through several currencies. They were paper transactions; no funds actually moved. In 2000 and 2001 the loans were unwound. With the Australian dollar riding high, News Corp.’s Australian subsidiaries recorded a $2 billion loss, while other subsidiaries in tax havens recorded a $2 billion gain.”
News Corp. isn’t commenting on the controversy, but in its regulatory filing it addresses “refund claims for certain losses pertaining to periods prior to the Separation in a foreign jurisdiction.”
The separation refers to last year’s splitting of Twenty-First Century Fox Inc. (NASDAQ:FOXA), which includes Murdoch’s profitable cable and satellite operations, from News Corp., which includes newspapers and book publishers, as well as Fox Sports Australia. The “foreign jurisdiction” refers to Australia.
News Corp. registered a gain of $654 million from the Australian Tax Office as of Dec. 31. It was still owed $140 million as of the start of the year. Meanwhile, News Corp. recorded a payment to 21st Century Fox of $573 million “net of the estimated tax associated with interest related to the refund.” News Corp. ended the year still owing 21st Century Fox $148 million.
Australia’s budget deficit is forecast to increase to $42 billion in the first half of the year.
Angelo Young is a general assignment business reporter who joined IBTimes in April 2012. Much of his career has been behind the scenes as a copy editor, assignment editor and...