Press Baron Rupert Murdoch started with his father's newspaper in Adelaide, South Australia, and built it into the world's second-biggest media empire. Time magazine has ranked him three times in their annual list of the 100 most influential people in the world. Vanity Fair routinely lists him in their "New Establishment" ranking of the 100 most influential people of the information age. And Forbes ranks him as one of the wealthiest men in the world, with an estimated net worth of $7.6 billion.

But now Murdoch's News Corporation is in hot water because reporters at Britain's News of the World tabloid illegally hacked into telephone voicemails across Britain. Since the scandal came to a boil, several company officials have resigned, others have been arrested, and the News of the World — which began publishing in 1843 when Queen Victoria ruled Britannia — has shut down. Here on our side of "the pond," the FBI is investigating whether Murdoch's forces may have hacked into the phones of 9/11 victims and their families.

But enough of all that legal wrangling. What does the tax man think? More specifically, what do the tax men think — specifically, the Australian Tax Office, with a top corporate tax rate of 36%, our own IRS, with a top rate of 35%, and Britain's Inland Revenue, with a top rate of 30%?

Well, the answer appears to be "not much." Murdoch is known for his anti-tax position. So it's no surprise that Murdoch has, in the words of Judge Learned Hand, "arrange[d] his affairs that his taxes shall be as low as possible." A 1999 study by The Economist magazine found that, for the four years ending in 1988, News Corp paid an effective tax rate of just 6%. That compares with fully 31% for News Corp's rival Disney, the world's biggest media conglomerate.

How do Murdoch and News Corp do it? First, by slicing and dicing their income into a dizzying number of pieces. And second, by taking advantage of seemingly every international tax loophole on the books. News Corp includes a staggering 800 subsidiaries. That number includes over 60 in various sunny tax havens like the Cayman Islands, Bermuda, the Netherlands Antilles, and the British Virgin Islands. (Hey, if you were picking someplace to send your money to avoid taxes, would you pick someplace like Iceland?)

Here's today's tax quiz question. What would you guess is Murdoch's most profitable subsidiary? Fox News? The Wall Street Journal? Britain's Sunday Times? Nope, nope, and nope. Try "News Publishers" — a Bermuda corporation with no newspapers, no magazines, and no TV stations. Heck, News Publishers doesn't even have employees! Shifting profits across national boundaries lets Murdoch Corp take advantage of jurisdictions like Bermuda with near-zero tax rates.

Ironically, though, all that chicanery may have actually cost Murdoch. As The Economist reported, "The complexity of News Corporation’s structure baffles analysts and puts off institutional investors." The magazine suggests that this complexity accounts for News Corp's share price underperformance in the late 1990s and makes it more expensive for him to finance new acquisitions.

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