Compass finances no issue: accountant

Clare Curran
Clare Curran
New Zealand multinational Fonterra will be using exactly the same financial structures as the Compass Group, and they are completely legitimate, Dunedin chartered accountant Chris Worth says.

Mr Worth wrote a letter to the Otago Daily Times this week criticising media coverage of the Compass Group's tax affairs.

Mr Worth called Dunedin South MP Clare Curran "gullible'' for saying its tax arrangements were "amoral'', and accused media of misrepresenting the situation.

Ms Curran stood by her comments when contacted yesterday.

• No taste for cook-off

Last year, the company's revenue was more than $170 million, and it posted a before-tax profit of $5.4 million, and then paid $2 million tax.

Attention has been drawn to transactions like related party receivables (loans to its British parent company), and fees Compass shells out to its parent.

Yesterday the ODT asked Compass for a breakdown of $13.4 million ‘‘other expenses'' in its accounts which was in addition to other listed expenses.

Mr Worth, a former partner in PricewaterhouseCoopers who has worked extensively overseas, said there was nothing unusual about the use of such transactions and line items.

Mr Worth said most of the company's $165 million expenses last year were for staff and raw material costs.

"There is no rational relationship between revenue and income tax,'' he told the ODT when contacted.

"Of course, multinational companies are constructed multinationally.

"Fonterra's got [many] overseas subsidiaries ... there will be elements of exactly the same sorts of things in Fonterra accounts, that you would find going the other way.

"So when you ask the question are there transactions open to multinationals that aren't open to domestic companies, the answer has to be ‘yes', but that doesn't mean to say they're not complying with their obligations,'' Mr Worth said.

The use of related-party loans was "treasury management on a worldwide basis'', a legitimate way to manage day-to-day finance.

"I don't see that as particularly sinister or anything.''

Asked to respond, Ms Curran agreed companies were not taxed on revenue but she was concerned about the use of the inter-party loan to the parent company.

"This procedure is legal but it's not moral.

"It has been alleged that Compass NZ is shifting its profits to its parent subsidiaries in order to reduce its NZ taxable income.

"If this were proven then while it is not illegal, it is immoral. I have gone further by saying it is amoral and I stand by that.

"Ultimately if proven, this places additional tax burden on companies and individuals who are not using tax avoidance measures,'' Ms Curran said.

Compass responded yesterday by reiterating its position that related-party loans are effectively a cash deposit facility.

"Compass NZ deposits and withdraws cash from this facility on an almost daily basis. It gets the appropriate interest return on it and that interest income is subject to the full rate of NZ corporate income tax.''

The company did not respond directly to the question about the "other expenses'' listed in its accounts.

"As with any organisation, Compass NZ has associated operating costs. These include (but are not limited to) insurances, staff uniforms, IT licences, printing and stationery,'' the company said in a statement.

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