Rupert Murdoch Tax Debate and Poll
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In the mid-1980s, conservative media tycoon Rupert Murdoch abruptly renounced his Australian birthright and became an American citizen. The move allowed him to comply with U.S. law prohibiting foreign ownership of television stations and helped Murdoch build a global entertainment empire that now includes 22 U.S. TV stations, TV Guide magazine, the 20th Century Fox movie studio and a huge U.S. broadcast network.
Today those U.S. subsidiaries provide Murdoch's company, News Corp., with the vast majority of its revenue and profit. But through the deft use of international accounting loopholes and offshore tax havens, all legal, Murdoch has paid corporate income taxes at one-fifth the rate of his chief U.S. rivals throughout the 1990s, according to corporate documents and company officials.
News Corp.'s tax rate has averaged 5.7 percent in this decade, while those of Walt Disney, Time Warner and Viacom have averaged from 27.2 percent to 32.5 percent.
News Corp. has mastered the use of the offshore tax haven. The company reduces its annual tax bill by channeling profits through dozens of subsidiaries in low-tax or no-tax places such as the Cayman Islands and Bermuda. The overseas profits from movies made by 20th Century Fox, for instance, flow into a News Corp.-controlled company in the Caymans, where they are not taxed, according to an executive familiar with the operation.
If information is power, then News Corp. easily ranks as one of the most powerful entities on the planet. No other media company can make the claim that Murdoch's company now does: that it will soon have the means to address more than 75 percent of the world's population simultaneously through satellite, broadcast and cable TV entities it owns wholly or in part.
The extent of News Corp.'s current tax shelter activities isn't publicly available. But as of June, News Corp. listed more than 60 subsidiaries incorporated in the Cayman Islands, Bermuda, the British Virgin Islands and the Netherlands Antilles, all nations that have low or no corporate taxes and limited financial disclosure laws.
In April 1995 President Clinton signed a Republican-sponsored tax-break bill. More than 150 congressional Democrats and some of the president's aides had recommended he issue the first veto of his presidency to reject legislation that includes a multi-million-dollar tax break for media giant Rupert Murdoch. That break was attached to legislation in the Senate that reinstates and expands a tax deduction for self-employed workers who buy their own health insurance. It permits them to deduct 25 percent of the cost of the premiums for 1994 and 30 percent this year. Clinton said the legislation is "good for the country" because of the health-care-insurance provision and for that reason he would sign it. But several Democrats had argued that Congress would have stripped out the Murdoch tax break if the president had vetoed it and insisted on a clean extension of the insurance provision. Some House Democrats saw much political potential in vetoing the legislation and blasting Republicans for giving breaks to friends of House Speaker Newt Gingrich, R-Ga. Gingrich has a book deal with Murdoch's publishing firm, Harper-Collins, but he has said he opposed the break.
Shortly after the Republicans won a majority in the U.S. Congress, the New York-based Harper Collins publishing company offered a $4.5 million advance to Republican leader Newt Gingrich to write a book. The Harper Collins publishing company happened to be owned by Rupert Murdoch, so the deal provoked a big scandal, because the FCC was governed by the Congress, which in turn was led by Newt Gingrich the second most influential person after the President. Does it mean that the advance was nothing but a bribe? Murdoch tried to play the same trick with Thatcher, offering her a $5 million advance. The publication of the book caused financial loss, but it gave Murdoch access to the political scene. Murdoch claimed he knew nothing about the deal. Gingrich, in his turn, said he had no idea that the Harper Collins publishing company belonged to Murdoch. But later it became known that at the same time one of Murdoch’s employees was preparing the book publication contract, Murdoch and Gingrich “happened” to be talking about the annoying investigation.