The most brazen tax dodge Rupert ever tried on

May 10, 2019

This Stephen Mayne story was first published in Crikey in March 2005. News Corp ended up settling, paying $77 million to the ACT government in 2010, as was explained by Noel Towell in this Canberra Times piece.

Crikey can today reveal that Rupert Murdoch has taken the extraordinary step of listing his family's $8.8 billion News Corp shareholding on the Bermuda Stock Exchange with the sole motivation of avoiding paying $50 million in stamp duty to the ACT Government.

It's all laid out in a prospectus lodged with the Bermuda Stock Exchange on 22 October, 2004. Go to page 11 and you'll read the following under the title "Purpose of Listing:"

The listing of Karlholt (formally Cruden, Kayarem and other Murdoch family trusts and structures) may have favourable consequences for the Company's shareholders under Australian stamp duty legislation. This is because the BSX is a member of the World Federation of Exchanges and transfers of securities that are quoted on a stock exchange that is a member of that Federation are not subject to stamp duty under that legislation. Ordinarily, transfers of shares which are not quoted on a stock exchange attract duty under Australian stamp duty legislation at a rate of 0.6% of the transfer consideration.
Karlholt owns the Murdoch family's 29.5% voting stake in News Corp, plus a smalller holding of preferred stock which adds up to almost 13% of the total shares on issue, worth $8.8 billion.

The shares have never traded and are unlikely ever to trade, although the prospectus says the float will "also provide access to an efficient facility for executing any future transactions in shares in the Company."

Rupert has a lot to thank Australia for and it is not as if the tax man has taken an unfair slice of his wealth in the past. After all, because Rupert's stake in News Corp pre-dates the introduction of capital gains tax in 1985, that $8.8 billion asset is CGT free, although any subsequent rise in the value after the move offshore will fall into the tax net.

The bizarre nature of the "float" is highlighted on page 12 of the "prospectus" where potential purchasers are told there are only ten shares on issue. Anyone with a spare $880 million can buy one share. Surely this makes shares in Karlholt the most expensive in the history of capitalism.

Search Google for "Karlholt" and you'll find some information from our transparent friends at the Bermuda Stock Exchange. And it raises at least two big questions: Will the Murdoch press report a word of this? And is NSW Premier Bob Carr likely to complain about it? Not likely, even though his government gave News Corporation access to the Sydney Showgrounds for $1 a year to build a Fox film studio.

Who can forget the way Rupert's local flagship, The Australian, took Telstra to task in December 2000 for registering two companies associated with its PCCW joint venture in Bermuda. Geoff Elliott, who has just been sent to Washington, breathlessly hopped into Telstra with a page one story on 9 December, 2000, which began as follows:
"Telstra is preparing to transfer more than $5 billion in assets to a shelf company in Bermuda to sidestep tax bills that could run to billions of dollars. The secret transfer of assets to the tax haven is a key part of Telstra's new alliance with Richard Li's Pacific Century Cyber Works."

Two days later he had a follow-up story headlined "Tax haven plan under scrutiny", which began: "Telstra executives will be locked in urgent meetings with the major political parties this week over Telstra's plan to shift more than $5 billion in assets to Bermuda."

If that wasn't enough, Geoff produced an 1,800-word feature on Saturday, 16 December, 2000 which was headlined "Wish you were here... Greeting from Bermuda". This piece included gems such as the following:

If you missed the news Telstra, a company still accountable to the Parliament of Australia, was yesterday due to transfer more than $5 billion of taxpayer and shareholder assets into a shelf company headquartered in Bermuda. And it didn't tell anyone. Just when another government owned institution, the Australian Taxation Office, is trying to discourage the use of tax havens, the 50.1% government-owned Telstra is involved in a merger of about $23 billion of assets with PCCW and will transfer the legal ownership to Bermuda.

The icing on the cake was a short editorial on the same day which read as follows:

Documents supporting the agreement between Telstra and Pacific Century CyberWorks were on public show in Hong Kong until December 7. The Australian had a good look and alerted the public a week ago to Telstra's plan to transfer more than $5 billion in assets to a shelf company in Bermuda. Telstra intended to make the documents available at home yesterday, but begged off late on Thursday night. And we thought Telstra was an Australian company in the communications business.