An Australian Taxation Office (ATO) commissioner has warned companies receiving taxpayer COVID-19 assistance shouldn’t be giving out fat bonuses to executives.
ATO second commissioner Jeremy Hirschhorn said that JobKeeper will hand out about $100 billion to Australian businesses to help retain staff.
“The quid pro quo in the community’s mind is that large corporates, in particular but not limited to those who accessed these schemes, will pay their share and improve their approach to tax,” he said Thursday at the Australian Financial Review CFO Live conference.
“Yes, follow the tax law, but also follow the spirit of the law.”
Several ASX-listed companies have outraged taxpayers and politicians for receiving millions in JobKeeper then using that assistance to pay out large bonuses to its leadership.
Retail giant Premier Investments Limited (ASX: PMV) was one example, revealing that it received $49 million in wage subsidies as of July – then paying out a $2.5 million bonus to its chief executive.
Consider the optics, commissioner warns
Hirschhorn said there was nothing in the rules about a prohibition on executive bonuses or dividends for subsidy recipients. But companies who pull such stunts are ravaged in public opinion, especially in economically difficult times.
“There was a quick backlash for those companies seen to be exploiting the spirit of the measures.”
Shareholders certainly would think twice about investing in businesses with this sort of conduct, according to the commissioner.
“I encourage you to consider the optics of making a statement in your annual report noting that the pandemic has not substantially impacted the operations of your business while at the same time collecting hundreds of millions of dollars in stimulus.”
The corporate community itself has also been critical of such stunts, with Hirschhorn citing a television appearance by Business Council chief Jennifer Westacott.
“Westacott told ABC’s Insiders that companies should not be paying executive bonuses if they are receiving JobKeeper because it wasn’t designed for that, it was designed to keep people working.”
The oft-used line “We follow the tax laws in every country in which we operate” just doesn’t wash if companies flagrantly exploit loopholes, he added.
Hirschhorn was promoted to the second commissioner seat in April, in the midst of the coronavirus shutdown. He oversees the ATO’s Client Engagement Group.
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Motley Fool contributor Tony Yoo has no position in any of the stocks mentioned. The Motley Fool Australia owns shares of and has recommended Premier Investments Limited. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.
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