UPDATE #2: Johnston's new column, "How I Misread News Corp.'s Taxes" is up. You can read it here.
"Rupert Murdoch's News Corp did not get a $4.8 billion tax refund for the past four years, as I reported," Johnston writes. "Instead, it paid that much in cash for corporate income taxes for the years 2007 through 2010 while earning pre-tax profits of $10.4 billion."
UPDATE: Looks like Reuters columnist David Cay Johnston got it wrong on Tuesday when he reported that Rupert Murdoch's News Corp. managed to turn a profit on income taxes over the past four years.
Reuters issued an advisory Wednesday afternoon stating that the column had been withdrawn and the claim that News Corp. made money on income taxes "is wrong."
A new column explaining the error is said to be on the way. We'll update when it's live, but in the meantime here's the full statement:
Please be advised that the David Cay Johnston column published on Tuesday stating that Rupert Murdoch’s U.S.-based News Corp made money on income taxes is wrong and has been withdrawn. News Corp’s filings show the company changed reporting conventions in its 2007 annual report when it reversed the way it showed positive and negative numbers. A new column correcting and explaining the error in more detail will be issued shortly.
ORIGINAL POST Tuesday at 5:09 p.m.: Rupert Murdoch’s News Corp. must have some mighty good accountants.
The U.S.-based media conglomerate actually made money on income taxes during the past four years, according to an investigation by Reuters columnists David Cay Johnston.
After digging through News Corp.’s financial disclosures, Johnston reports that based on the company’s $10.4 billion profits during that time period, the company would have been expected to pay $3.6 billion at the 35 percent corporate tax rate. But instead the company managed to collect $4.8 billion in income tax refunds, “all or nearly all from the U.S. government.”
For the visual learners among us, Reuters compiled this handy chart.
And exactly how did News Corp. go about turning an income tax profit over the past four years? According to the report, by using these three tricks of the trade: “aggressive use” of intra-company transactions that moves profits to global tax-free locations and losses to heavily taxed areas; buying companies with tax losses; and by maximizing the benefits of tax deferrals.
That might sound remarkably boring to those of us who never splurged for Turbo Tax Premier, so we'll repeat the takeaway: Instead of paying $3.6 billion in corporate income taxes over the past four years, the company actually received refunds worth $4.8 billion, a total worth nearly half of News Corp.'s pre-tax profits over the same period.
In his column, Johnston concedes that many major corporations also benefit from their mastery of the U.S. tax code, but adds that most of corporate America doesn't own one of the most powerful newspaper editorial pages in the Wall Street Journal or one of the most popular cable news channels in Fox News.
Johnston writes: "Fox News, the editorial pages of his Wall Street Journal and other Murdoch outlets often rail against taxes. Their attacks on government benefits for the elderly, the sick, the jobless and children focus attention on the uses of tax dollars and away from his aggressive efforts to enjoy the benefits of civilization without paying for them."