News Ltd in the Shit with the ATO
Tax claim on payments to show games
The Australian Taxation Office believes that News Ltd has committed criminal offences in relation to not paying withholding tax on $US878 million ($922 million) it paid to secure rugby rights.
The exact offences were not clear, but yesterday the barrister for News Sports Programming, a News subsidiary, Elizabeth Collins, told the judge, Peter Graham, in the Federal Court that the ATO had indicated the company's behaviour involved criminal offences.
"The clear indication of the commissioner is that this is a criminal offence," Ms Collins said. She said the allegations against News were not always interpreted as criminal, but in this case they had been.
Justice Graham agreed to expedite the hearing, which he yesterday set for trial over two days in September.
"Criminal offences have been alleged and it is important the matter is resolved quickly," Justice Graham said.
He pointed out News seemed to be a "necessary party" to the action, but was not listed as an applicant in the court papers, which he said would be a "formidable problem at some stage". News Sports paid money under the agreements, but it is News that is responsible for the deals, giving News Sports little standing. "The mere fact you pay someone else's obligations doesn't give you rights,' he said.
Ms Collins said the matter wouldbe addressed before it was next before the courts.
The fact you pay someone else's obligations doesn't give you rights.
News yesterday declined to comment on the case, which returns to court on August 21. News faces a multimillion-dollar tax bill after an ATO review found that $US878 million in payments under two SANZAR (South Africa, New Zealand and Australia Rugby Union) agreements, were royalties and subject to withholding tax. SANZAR runs the Super 14 and Tri Nations rugby tournaments. Under the second deal signed in 2004 (which expires in 2010) 10 payments are still owing but the exact amount of money owing is not disclosed.
Court papers don't indicate how the payments were split between the three rugby bodies, but under both the South African and New Zealand double-tax treaties, withholding tax is payable at 10 per cent. If News loses, the South African Rugby Union and New Zealand Rugby Union Incorporated will only receive 90 per cent of the value of future money owing, with the other 10 per cent being withheld for tax. Justice Graham acknowledged that this could have an effect on the ability for the organisations to pay players, organise games and determine budgets.
-Marsha Jacobs
