While Apple has been in the news this week for the low levels of income tax it pays in Australia, Canon Australia actually received a tax benefit of $1 million to boost net profit before tax tax from $38.6 million to an after-tax $39.6 million in 2012.
(Canon hasn’t yet filed it’s 2013 annual report with ASIC. It operates on a Jan-Dec financial year.) While Apple paid the ATO $36 million in income tax on sales of $6 billion in the 2013 financial year (according to Taxpayers Australia), Canon Australia paid no tax on sales of $722 million, enjoying a tax credit instead. From that gross sales figure of $722 million, $480 million was transferred to the parent as cost of sales (effectively the landed cost of goods imported). Local marketing, admin and other costs including wages and salaries reduced the gross profit of $242 million down to $38.6 million in profit before tax.
Ordinarily, at a 30 percent company tax rate, Canon would have contributed around $11.5 million in company tax. However, the annual report indicates that Canon Australia enjoyed a tax credit of $1.03 million.
However, Canon supplies annual report figures for both Canon Australia and the ‘consolidated entity’, which includes Canon NZ, Canon Finance, Canon NZ Finance, Oce and Lamberts Business Systems (NZ). The Canon group actually paid income tax of $7 million on profit before tax of $12 million. This was the only income tax paid by either Canon Australia or the Canon consolidated group in the two years 2011 and 2012. Canon Australia received a tax credit of $5.8 million and the consolidated group a tax credit of $1.7 million in 2011.
COMMENT: When we originally reported on Canon’s 2012 financial report, we stopped at the Profit Before Tax line. Even though there was some newsworthiness in Canon Australia apparently not paying income tax on a profit of close to $40 million, we were conscious of a lack of any deep understanding of corporate tax matters – so we sort of ‘self-censored’. However, in the light of the renewed interest in multinational corporations’ tax obligations, we thought it worth sharing this interesting extra detail.
(PS: I wish I could afford that kind of accountant!)