09/04/19

AUSTRALIA: Business Asks Government what a Tax Haven is, as it Fights Move to Boost Tax Transparency.

As published on abc.net.au, Monday 8^th April, 2019.

Multinationals are fighting back against a proposal by the Federal Government's tax advisory board to increase transparency, arguing political leaders first need to define what a tax haven is.

The government's tax advisory board has asked whether greater detail about a company's tax disputes should be revealed

Business argues that detailed tax information could be misleading, but community groups suggest reporting should be mandatory

The move comes as tax authorities and global investors back moves to have greater tax transparency

A submission by KPMG, one of the big four accounting firms which advises Australian companies and multinationals on their tax structures, also suggests that a proposal to divulge whether a company is at the top of the Australian Taxation Office (ATO) list of the nation's most risky taxpayers, would serve no useful purpose.

The Federal Government's tax advisory body, the Board of Taxation, has asked whether there should be changes to the Tax Transparency Code introduced by former treasurer Joe Hockey in the 2015 federal budget.

The code is voluntary and aims to give Australians a more detailed picture of a company's tax affairs, by allowing companies with more than $100 million annual turnover to divulge greater tax information in their annual reports, financial reports and/or websites.

The code applies for both Australian-listed businesses and foreign multinationals that do business in Australia, but a number of the tech giants including Apple, Facebook and Microsoft, have not signed up.

Critics argue the code, as it stands, gives little useful information.

The Tax Justice Network (TJN), a coalition of community groups and NGOs that have long argued for greater tax transparency, suggests voluntary disclosures under the code allow multinationals to "continue to hide behind a veil of secrecy over their tax affairs".

It wants the Government to instead make it mandatory for companies to give more detailed tax information, including listing every entity in a company, how much tax it pays, and where those taxes flow.

KPMG said the Government must first define what it constitutes as a "no- or low-tax" jurisdiction, before requiring companies to disclose details about their subsidiaries and where taxes ultimately flow.

ABC News examines the main tax changes for businesses that the major political parties are proposing, and the estimated dollar impact on the federal budget.

In its submission to the Board of Tax, KPMG said its corporate clients had raised concerns about changes to the code, including the disclosure of Australian Taxation Office (ATO) compliance activities against them and ongoing tax disputes.

The ATO uses various risk ratings — ranging from highest to lowest risk — to decide which companies it targets every year with reviews and/or audits.

KPMG said disclosing these risk ratings would be "potentially misleading and of little value to the public in understanding a signatory's actual compliance with its tax obligations".

It also noted that ATO risk ratings on specific issues can include wording such as, "we have decided not to devote further resources to the matter (at this time)".

Such wording, if disclosed to the public, "could easily create the wrong impression of the ATO's diligence in administering the law, and of taxpayers' compliance with their obligation", the firm said.

Recent Treasury consultation has raised the possibility that signing the Code may become a de facto requirement for companies that bid for certain Federal Government contracts. KPMG suggests postponing finalising its proposals until after a decision on that is made.