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Australia Expects MNE Voluntary Tax Compliance To Grow

by Mary Swire, Tax-News.com, Hong Kong

08 December 2017


Australia has released figures on the tax contribution made by Australia's large companies and multinationals, reporting a voluntary tax compliance rate of 91 percent and stating that revenues will increase significantly as a result of a raft of new legislation brought in to encourage multinationals to drop aggressive tax planning arrangements.

The Australian Tax Office's corporate tax transparency report for 2015–16 covers 1,693 Australian public and foreign-owned companies with an income of AUD100m (USD75m) or more, and 350 Australian-owned resident private companies with an income of AUD200 million or more.

These companies pay around 60 percent of total company income tax that was payable in 2015-16. That year, they paid AUD38bn.

Deputy Commissioner Jeremy Hirschhorn said that Australian taxpayers should have confidence that the largest companies are being required to pay the right amount of tax on their Australian profits, and most do so voluntarily. "Australia has one of the strongest corporate tax systems in the world," Hirschhorn said. "In 2014–15, large corporate groups paid 91 percent of their tax due voluntarily, with a further three percent raised through ATO compliance activities. Although this is world-leading performance, we are resolute in further increasing this level of compliance."

The Government has introduced a number of new legislative provisions to tackle tax evasion and avoidance by multinationals, including establishing a Tax Avoidance Taskforce, introducing a multinational anti-avoidance law (MAAL), a diverted profits tax (DPT), and a country-by-country reporting framework.

According to Hirschhorn, Australian revenues from these companies will increase considerably in next year's report, including as a result of the MAAL. The Government said in April 2017 that it was auditing 59 multinational companies and of the 175 taxpayers that the tax agency had met with to discuss tax compliance matters, 25 had agreed to restructure their tax affairs.

"In the last financial year alone, we issued more than AUD4bn in amended assessments relating to prior years to public groups and multinationals, and we have already issued a further AUD1bn in amended assessments this financial year. These amounts are not reflected in the corporate tax transparency data," Hirschhorn said. "Many companies provide significantly more detailed information through the Board of Taxation's Voluntary Tax Transparency Code. The ATO strongly encourages companies that have not yet signed up to do so."

"On the back of solid growth in company profits and higher commodity prices, we are seeing a strong increase in company tax collections in 2016–17, which will be reflected in the data next year," Hirschhorn added. "In addition, we expect to begin to see the impact of the MAAL in the 2016–17 data as companies restructure to comply with the requirements of the new law. In the coming years the data will reflect an estimated AUD7bn each year of increased sales returned in Australia as a result of the operation of the MAAL and will also reflect restructures made by companies to avoid paying the DPT. Increasingly, the data will also reflect our approach to resolving past matters in requiring future compliance to be 'locked in.'"

The MAAL came into effect on January 1, 2016. It applies to multinationals operating in Australia with global revenues of more than AUD1bn, and requires companies that "avoid" taxes to pay back double what they owe, plus interest.

TAGS: compliance | tax | tax compliance | interest | law | audit | Australia | multinationals | legislation | tax planning | transfer pricing | Tax

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