Australia’s Tax Perspective: You Cannot Tax What You Cannot See…

By Robert Robillard - 21 August 2015

This blogpost originally appeared on rbrt.ca.

What the BEPS?

Well, with such a title, one may be led to think that it is about taxation of the air we all breath.

Not really, in fact…

The Australian Senate Inquiry into corporate tax avoidance and aggressive minimisation has (officially) released its Part I Report titled You cannot tax what you cannot see.

The complete report is available here.

The report contains 17 recommandations:

“Recommendations

Evidence of tax avoidance and aggressive minimisation

Recommendation 1

3.68 The committee recommends that the Australian Government work with governments of countries with significant marketing hub activity to improve the transparency of information regarding taxation, monetary flows and inter-related party dealings.

Multilateral efforts to combat tax avoidance and aggressive minimisation

Recommendation 2

4.43 The committee recommends that the Australian Government continue to take a leadership role in finalising and implementing the efforts of the OECD in addressing problems associated with base erosion and profit shifting. However, the committee also considers that international collaboration should not prevent the Australian Government from taking unilateral action.

Potential areas of unilateral action to protect Australia’s revenue base

Recommendation 3

5.31 The committee recommends that a mandatory tax reporting code be implemented as soon as practicable but no later than the current timeframe for the proposed voluntary public transparency code. Any Australian corporation or subsidiary of a multinational corporation with an annual turnover above an agreed figure would be required to publicly report financial information on revenue, expenses, tax paid and tax benefits/deductions from specific government incentives, such as fuel rebates and research and development offsets.

Recommendation 4

5.32 The committee recommends maintaining existing tax transparency laws which apply to both private and public companies.

Recommendation 5

5.39 The committee recommends establishing a public register of tax avoidance settlements reached with the ATO where the value of that settlement is over an agreed threshold.

Recommendation 6

5.40 The committee recommends that the government consider publishing excerpts from the Country-by-Country reports, and suggests that the government consider implementing Country-by-Country reporting based closely on the European Union’s standards.

Recommendation 7

5.45 The committee recommends that the ATO, in conjunction with Treasury and other relevant agencies, provide an annual public report on aggressive tax minimisation and avoidance activities to be tabled in Parliament. This report could include estimations of forgone revenue, evaluate the effectiveness of policy and propose potential changes.

Recommendation 8

5.85 The committee recommends that the Australian Government tender process require all companies to state their country of domicile for tax purposes.

Recommendation 9

5.86 The committee recommends mandatory notification by agencies to the relevant portfolio Minister when contracts with a dollar value above an agreed threshold are awarded to companies domiciled offshore for tax purposes.

The capacity of Australian government agencies to collect corporate taxes

Recommendation 10

6.25 The committee recommends an independent audit of ATO resourcing, funding and staffing.

Recommendation 11

6.26 The committee recommends the ATO report to parliament, at least annually on:

the number of audits or disputes launched concerning multinational corporations;
the number of cases settled with multinational corporations;
the number of successful legal proceedings concluded against multinational corporations; and
the staff resources allocated to tax compliance of multinational corporations.

Recommendation 12

6.71 The committee recommends that taxation legislation be amended so that non-reporting entities are required to disclose related party information in financial reports under the Corporations Act if notified to do so by the ATO.

Recommendation 13

6.72 The committee recommends that the concept of ‘grandfathered large proprietary companies’ be removed from the Corporations Act, and these companies be required to lodge financial reports with the Australian Securities and Investments Commission (ASIC).

Recommendation 14

6.73 The committee recommends that all proprietary companies are required to review and confirm their size with ASIC annually.

Recommendation 15

6.74 The committee recommends that the confidentiality provisions in section 127 of the ASIC Act be amended to allow ASIC to share information with the ATO without having to notify the affected person.

Recommendation 16

6.75 The committee recommends that people who propose to become directors of companies be required to provide evidence of their identity to the ASIC.

Recommendation 17

6.76 The committee recommends that ASIC amend Class Order 98/98 so that a company is not eligible for financial reporting relief, where the ATO notifies the company and ASIC that the relief does not apply to that company.”

Who needs the OECD and the BEPS initiative with such a barrage of “recommendations”, could we ask.

In the end, we still fail to see how this type of unilateral initiatives does not lead to an explosion of double taxation cases all over the world.

Robert Robillard, Ph.D., CPA, CGA, Adm.A., MBA, M.Sc. Econ., M.A.P.
Senior Partner, RBRT Inc.
514-742-8086; robertrobillard “at” rbrt.ca
www.rbrt.ca

The convergence of RBRT’s tax, accounting and economics expertise makes a difference. The information in this blog post is general information only. Data and information come from sources believed to be reliable but complete accuracy cannot be guaranteed. RBRT Inc. or the author are not responsible or liable for any error, omission or inaccuracy in such information. The opinions expressed in this blogpost are those of the author. Readers should seek advice and counsel from RBRT Inc. as required.