Gloves off in supermarket-supplier war, tax avoidance claim after Coles-Arnott’s pricing dispute

Posted by AFN Staff Writers on 9th December 2015

Arnott’s, which is owned by the US based Campbell Soup Co, made headlines last week for its decision to stop supplying Tim Tam’s and other popular biscuits to Coles until the supermarket agreed to a price increase.


The drama for Arnott’s continues with The Australian newspaper today reporting a claim that the biscuit manufacturer has sent “more than AUD$62 million to off-shore related parties.” This could result in a $20 million saving on Australian tax, the paper said.


The article “Tax office left with crumbs as Arnott’s offshores profits” article published in the 9 December 2015 edition of The Australian reported that the most recent accounts for Arnott’s Biscuit Holdings showed that it paid $40.3 million in 2015 on loans from Campbell Soup Co. It also reportedly paid Campbell Soup Co $21.56 million in royalty payments.


The Australian said one interest payment of $36.232 million was made to Campbell Finance Company located in Delaware, which the article describes as a tax haven. The other interest payment of $4.6 million went to Campbell Soup Co.


The Australian reported that in 2014 Arnott’s sent $61.39 million to these offshore parties through interest and royalty payment which significantly reduced the taxability of profits from the Australian operations of Arnott’s.


“The payments reflect commercial transactions that comply with all applicable Australian and US laws,” she said.


The Australian followed this statement by saying: “There is no suggestion Arnott’s or Campbell Soup Co breached any Australian law or local taxation rules by offshoring money and lowering its pre-tax income,” the paper stated.


Arnott’s responded to Australian Food News’ request for comment with the following statement:


“The payments reflect commercial transactions that comply with all applicable Australian and US laws,” the statement read.


“Campbell does business internationally. As a result, we file income tax returns in US and non-US jurisdictions, including Australia where we have extensive operations. We take this matter very seriously and are in compliance with all applicable laws and regulations. The tax report mentioned was from February of 2015,” the statement concluded.


Tax offshoring article comes just after Coles-Arnott’s dispute goes public


The report comes a week after it was made public that Coles initially refused to pass on a price rise for Arnott’s products in October 2015. With Arnott’s refusing to give in, the biscuit manufacturer started to stop sending supplies to Coles supermarkets.


Follows the Wesfarmers-Aldi insinuation incident


This is not the first incidence of offshoring claims made within the supermarket industry this year. In June 2015 Richard Goyder, Chief Executive at Wesfarmers (the parent company of Coles) insinuated that Aldi was not meeting its Australian tax obligations.


Whilst attending an event at the American Chamber of Commerce Goyder was reported as saying “go and have a good look at how much tax Aldi pays in this country”.


Aldi responded by saying that it was meeting its Australian tax obligations revealing that its average corporate tax rate was 31 per cent of net profit. The supermarket further stated that it paid AUD$81.6 million in taxes to the Australian Taxation Office in 2013. A Senate inquiry held earlier in 2015 also did not name Aldi amongst international companies being audited by the ATO for corporate tax avoidance.


Aldi also used a Federal Senate inquiry in July 2015 to opened up more about its profits and taxes to help dismiss rumours it does not pay all of its Australian taxes.


Other relevant articles


Dispute over winners in Arnott’s, Coles and Woolworths battle


Aldi opens up on its fantastic profits, without fantasy on tax