Tax transparency to the public has emerged as a key area of focus for government and tax authorities globally. In Australia, we have:
- published the first Report of entity tax information in December 2015. This lists certain details of all public entities reporting more than $100 million in total income, all private entities reporting more than $200 million in total income and all entities with either petroleum resource rent tax or minerals rent tax payable
- published explanatory material to provide the broader community with context and relevant information
- seen a number of these entities provide additional information on their own websites to provide context to their published figures
- provided a comprehensive overview of corporate compliance to the Senate Standing Committee on Economics inquiry into corporate tax avoidance. The committee has published two interim reports with a number of recommendations focused on increased transparency.
To build on this work, some of the continuing initiatives include:
- implementing the Combating Multinational Tax Avoidance package, which included country-by-country reporting; doubling of the penalties (from 50% to 100%) for significant global entities entering tax avoidance or profit-shifting schemes; and the Multinational Anti-Avoidance Law
- our four-year International Structuring and Profit Shifting program, which has raised $1.2 billion in liabilities since it commenced in 2013
- providing support to Treasury to implement components of the OECD Base Erosion and Profit Shifting Project agreed on by the G20. We continue to collaborate with the OECD and other revenue authorities on developing best practice for implementation of specific action items, such as working with the Board of Taxation on the adoption of the hybrid mismatch rules and exchanging taxpayer specific rulings through the exchange of ruling initiative.
These initiatives are also informed by increasingly sophisticated techniques and tools to acquire and analyse growing volumes of data. In addition to the information reported by taxpayers in tax returns and schedules and provided by foreign tax administrations under information sharing arrangements, we are now obtaining data provided to other regulators, including financial accounting data.
Engaging early provides assurance for consolidated groups
The tailored compliance engagement approach has provided consolidated groups with the opportunity to seek guidance on the tax consequences of a transaction (either in train or seriously contemplated). This provides assurance on how the ATO views specific tax risks in relation to a specific transaction. They are also made aware upfront of any issues that may need verification after transaction or lodgment.
In one case, the ATO invited a consolidated group to discuss calculations relevant to the tax treatment of a current transaction. This meant that records and staff associated with the deal were readily available to clarify the facts. The ATO was able to provide certainty around cost allocation and asset recognition for the consolidated group. In addition to the certainty obtained, this approach resulted in lower compliance costs for both the group and the ATO.