By Noel Towell
GLOBAL media giant News Corporation has been forced to pay the ACT government $77 million after an alleged tax avoidance scheme perpetrated on the territory unravelled.
Rupert Murdoch's multinational media empire paid the money late last year in a secret settlement, two years after being taken to court by the ACT's tax authorities demanding $84 million.
The money will allow the territory to present an almost balanced budget this financial year and represents a stunning victory by the nation's smallest jurisdiction over the international corporate giant, which reported revenue of nearly $4 billion in 2009-10.
News Corporation's Australian arm, News Limited, owns newspapers including The Australian and the Herald Sun.
The company did not include the massive tax and penalty payment in its December quarter update. A News Corporation spokesman said yesterday that the case had been settled confidentially and declined to comment further.
The ACT government is also refusing to talk about the money, citing tax laws.
But documents reveal a four-year investigation by Treasury Commissioner for ACT Revenue Graeme Dowell and his officials.
The papers outline how they untangled a complex web of transactions between Murdoch-controlled companies that stretched through Victoria, Queensland and the tax haven of Bermuda.
In 2004 the territory claimed it was owed duty on the transfer of nearly $9 billion worth of shares of a former territory-registered Murdoch company, Karlholt, in a restructure of the media mogul's empire.
The ACT initially issued its tax demands in March 2008 to News Corporation with a duplicate demand to another Murdoch company, News Australia Holdings.
The territory said it was owed $53 million in unpaid transfer duties and $5 million interest. It said that listing Karlholt on the Bermuda stock exchange, once it became clear the ACT would pursue the money, was a tax avoidance scheme that attracted $26 million in penalties. The Tax Commissioner alleged the Bermuda move was an attempt to take advantage of a loophole exempting shares on listed companies from transfer duties.
But News, through lawyers Minter Ellison, told the ACT that it owed no tax and said any legal action would be ''resisted strongly''. It also described the taxman's attempts to recover the money as an ''improper exercise''.
That resistance quietly came to an end late last year with the handover of $77,551,000. The payment was recorded as an obscure entry in the ACT mid-year budget update, described as duties on ''shares and marketable securities''.
It was alleged that News made several attempts to avoid the duty, first by unsuccessfully applying to transfer the company's registration to Victoria and then by applying for a waiver on 95 per cent of the dutiable amount. After that failed, the Bermuda move was made.
Mr Dowell's March 20, 2008 letter to the company read, ''I am satisfied that the listing of Karlholt on the BSX and the transfer of Karlholt shares were part of a tax avoidance scheme … that benefited News Australia Holdings Limited.''
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