As the Australian Tax Office moves to investigate large consumer electronics companies for potential tax evasion, LG Electronics Australia has this month declared a paltry $11,942 profit. This was a fall of $807 on the $12,749 profit they declared in 2009.During the year, LG sacked several senior executives including their CEO and sales director, with the company’s marketing now headed by a new team of executives.
In the Federal Court recently, the Korean company had a significant victory over arch rival Samsung Electronics after Samsung moved to try and stop LG from advertising its new Cinema 3D TVs. Samsung described the LG advertising at the time as “deceptive and misleading.”
LG, which spent $23 Million on marketing last year, has not said why they constantly deliver low profits when arch rival Samsung is delivering profits in excess of $20 Million.
One of the areas set to be investigated by the ATO is whether large consumer electronics companies are engaging in transfer pricing. This involves the artificial inflation of the price of goods being brought into Australia by a large corporation in an effort to shift profits to offshore tax havens.
While there is no evidence of LG being involved in transfer pricing, there is evidence, according to ATO sources, of other large IT companies engaging in transfer pricing practices. Among those set to be targeted are several Chinese technology manufacturers.
Several analysts are tipping that LG Australia will have a better 2011 after the appointment of a new management team and the introduction of several new products, including a new TV lineup and new ‘Smart’ appliances which are set to be launched in the second half of the year.
