Crown Resorts Hit With $362 Million Tax Payment
The Australian Taxation Office (ATO) recently sent in a notice that requires Crown Resorts to pay $362 million in back taxes with relation to its failed casino venture in the United States. The failed development of the well known Cannery Casino Resorts has now put Crown Resorts in a tight financial spot as they were not expecting this fine from the ATO and have a full-pipeline of new casino projects across the globe.
Aussie billionaire James Packer who owns 53 percent in Crown Casinos, bought Cannery Casino Resorts back in 2007 for $US 1.75 billion, which comprised four casinos spread across the states of Nevada and western Pennsylvania. The subsequent global financial crisis annihilated the revenues of the casino industry, causing enormous losses to the company resulting in a wipe out of billions of dollars.
The ATO is now demanding that Crown Resorts pay an income tax of $250 million for the years 2009-2014 and penalties thereon amounting to $112 million. Crown Resorts has announced that it will be fighting the assessment and verdict of the ATO by saying that Crown Resorts has paid the correct amount of taxes.
In a statement, Crown Casino said,
Crown Resorts is a model corporate citizen and pays its fair share of taxes. In financial year 2015 Crown paid more than $640 million in taxes to all levels of Australian governments, which amounts to almost two-thirds of Crown’s Australian normalised profit before tax. Crown considers that it has paid the correct amount of tax and intends to pursue all available avenues of objection including, if necessary, court proceedings to the amended assessments.
Arnhem Investment Management, which is an investor in Crown expressed surprise at the sudden tax bill but acknowledged that given the size of the write-offs, a dispute is to be expected.
Goldman Sachs said that the assessment would have a negative impact on Crown Resorts. Goldman analyst Adam Alexander noted that this fine worked out to an impact of 50¢ a share but more importantly, an up-front payment would increase pressure at a time when the company is in a high capital expenditure phase. This phase was made in reference to investments already committed to by Crown Resorts for the development of its Alon casino in Las Vegas and the Sydney casino at Barangaroo.
There is no clarity yet on whether the company will need pay the amount right away. Australia’s tax commissioner Chris Jordan recently announced that the tax department will take companies to court over tax disputes rather than settling cases in order to improve revenues.
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