The Federal Government announced on 4 February 2013 that it intended to amend taxation laws in order to improve the transparency of Australia's business tax system. Following this, on 3 April 2013 the Government released a discussion paper titled "Improving the transparency of Australia's business tax system" for public review and comment.
The discussion paper outlines three proposals aimed at increasing the transparency of Australia's tax system.
Proposal 1: Requiring the Commissioner to publish limited tax return information of large and multinational businesses (LMBs)
The first proposal requires the Commissioner to publish the following information of LMBs:
- the Australian Business Number (ABN) and name, and the reported income, taxable income and tax payable, for corporate tax entities with a total income of $100 million or more; and
- the ABN and name, and the amount of any Minerals Resource Rent Tax (MRRT) or Petroleum Resource Rent Tax (PRRT) payable by entities.
The term 'total income' is undefined but is envisaged to consist of an entity's total income for accounting purposes, enabling the calculation of effective rates of tax. Importantly, the proposal allows the Commissioner to source all of the requisite information from the affected entity's tax return, thereby ensuring that there will be no additional compliance costs to taxpayers. This proposal will apply from 1 July 2013.
The stated objective of this measure in the discussion paper is to identify an entity's total gross income for accounting purposes. This will have the effect of educating the public and allowing debate by third parties on the amount of tax paid by LMBs.
Most commentators would question whether this objective is realistic or whether there is some other motive behind the measure, such as "naming and shaming" taxpayers that the government believes are not paying their 'fair share' of tax.
Publishing a corporate entity's tax payable, without providing information as to how that amount was calculated or determined runs the risk of fuelling public perceptions that particular corporate entities are not paying enough tax. Such published information may be used by third parties, such as competitors or the media, to cast these corporations in a negative light as not paying their 'fair share' of tax and so not being good corporate citizens.
Some taxpayers may address any public misconceptions arising from ATO publication by publicly releasing information to explain the position disclosed. Others may choose not to reveal any additional information. A taxpayer's response will depend on its business profile and circumstances.
As there were approximately 2000 LMBs with revenue over $100 million in the 2009-10 income year (Table 1), the introduction of Proposal 1 will affect a substantial proportion of Australia's business community.
The affect on companies liable to pay PRRT or MRRT will be less pronounced as there is only a small number of these companies (Table 2).
Proposal 2: Publication of aggregate amounts of tax revenue collected for each commonwealth tax
This measure involves publication of aggregate tax collections, regardless of whether publication may result in a corporate entity being identified. However, publication will not be allowed if the information could be used to reveal the identity of natural persons.
The stated objective of this measure in the discussion paper is to disclose aggregate amounts of tax revenue collected or assessed.
This is an end rather than an objective and it is unclear exactly what the measure is designed to achieve. It is also unclear as to what the published information will be used for and by whom.
The ability to definitively identify an entity and its tax payments from the publication of an aggregate collection of a tax and other publicly available information is limited in practice. However, the beer excise example in the discussion paper illustrates that identification of particular entities could occur in industries in which there are small numbers of participants.
The release of aggregate tax collection information has largely been an issue limited to MRRT. Considering that the proposal to release certain tax return information requires MRRT payments of entities to already be publicly listed, the practical effect of this proposed change will likely be diminished.
Proposal 3: Enhanced information sharing between Government agencies
The exchange of information between the ATO and other government bodies is subject to the taxpayer confidentiality provisions in the Taxation Administration Act 1953, as well as other relevant confidentiality and privacy laws.
Currently, information sharing is achieved through the use of specific exceptions to the taxpayer confidentiality provisions and formal understandings between government agencies that information sharing will be consistent with any applicable legal obligations.
The Government has outlined a number of proposals aimed at enhancing existing information sharing arrangements.
The stated objective of this measure in the discussion paper is to increase information sharing between the ATO and ASIC, APRA and Treasury, including for various processes related to the Foreign Investment Review Board.
Again, this is an end rather than an objective and the discussion paper does not clearly articulate what the measure is designed to achieve.
The implications of this proposal are unclear at this stage and will depend on what information is being shared and for what purpose.
Table 1 - Number of companies with >$100m revenue that will be affected by the proposals1
|INCOME YEAR||NO. OF COMPANIES WITH $100M OR MORE REVENUE||COMPANY TAX PAID ($M)||PROPORTION OF TOTAL COMPANY TAX PAID (%)|
Table 2 – Companies liable to pay PRRT that will be affected by the proposals2
|INCOME YEAR||NO. OF COMPANIES LIABLE TO PAY PRRT||PRRT ASSESSABLE RECEIPTS ($M)||PRRT PAID ($M)|
1 ATO, Taxation Statistics 2007-08
(2011), Chapter 3; ATO, Taxation Statistics 2009-10
(2012), Chapter 3.
2 ATO, Taxation Statistics 2005-06 (2008), Chapter 3; ATO, Taxation Statistics 2007-08 (2011), Chapter 3; ATO, Taxation Statistics 2009-10 (2012), Chapter 3.
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