We are an active and capable administrator
We use both one-to-one and one-to-many approaches with large corporate groups to assist them to comply with their tax obligations.
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Our workforce focused on large corporate groups is larger and more skilled than it has ever been
We continue to build on a highly capable workforce of over 1,600 staff dedicated to assisting and assuring the tax compliance of large corporate groups. Most of these staff focus on assurance and providing guidance such as rulings.
Our workforce has been bolstered by additional recruitment under the Tax Avoidance Taskforce, with more to come. Part of our workforce strategy includes selective recruitment of skilled private sector professionals from both advisory firms and large companies.
Our proactive approach
Our approach is to proactively inform the market of areas of concern as we become aware of them
The tax affairs of large corporate groups tend to be more complex due to their international dealings and the size of their businesses.
Under the Tax Avoidance Taskforce, we actively address multinational tax avoidance. Preventing other taxpayers entering into tax avoidance schemes is a key element of our strategies.
This has contributed to use of taxpayer alerts. These provide an early warning to taxpayers and their advisers about our concerns. They cover new or emerging transactions, structures or arrangements we consider may represent a compliance risk.
We use practical compliance guidelines (PCGs) to support compliance. PCGs generally set out our view of what concerns us and what doesn’t, from a compliance perspective. They're often used in grey areas like transfer pricing.
We continue to issue public rulings to provide our interpretation of legal provisions. Law companion rulings provide this advice to clients at the time the legislation is drafted. They become public rulings when the legislation is passed.
Most large corporate groups don’t consciously take on tax risk. Knowing we have concerns with an arrangement allows them to make more informed compliance choices. They can do this by:
- engaging with us
- seeking independent advice
- deciding not to proceed with an arrangement.
The underlying intent of our public advice and guidance is to help inform business. This is so large corporate groups don’t inadvertently find themselves in a tax dispute because they didn’t know our position.
We take robust compliance action to test our understanding of the law if a large corporate group takes a position we have flagged as of concern. Our litigation strategy also includes identifying strategic cases for litigation to clarify the law.
For more information see Population-wide approaches to preventing non-compliance.
One-to-one engagement with large corporate groups gives us assurance over approximately two-thirds of all corporate income tax
Economic activity and corporate income tax obligations are highly concentrated in approximately 1,795 large corporate groups each earning over $250 million in income. They pay approximately two-thirds of all corporate income tax. The largest 100 pay about 50%.
This concentration of economic activity and tax payments means it is possible to obtain assurance over a large percentage of the corporate income tax base. We do this through detailed one-on-one reviews of a small number of companies.
We already perform detailed one-on-one reviews of the largest 100 corporate groups. Extra government funding under the Tax Avoidance Taskforce enables us to extend these reviews to the rest of the population and obtain a greater level of assurance over their tax compliance.
We use a range of approaches, including applying risk rules to quantitative data, to review the remaining large corporate groups. When we identify risk we take specific action.
We have a high level of engagement with the large corporate groups population. The knowledge we have gained from this makes us confident we are identifying and addressing the risk that taxable income is not being reported correctly.
Through taskforce-enabled initiatives we will have detailed coverage of the income tax paid by these groups. This work underpins our aim of having confidence in the tax compliance of large corporate groups.
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We use a range of data to inform our risk analysis and assurance over the tax compliance of large corporate groups
We have access to detailed information on specific large corporate groups through their tax returns and information they provide as part of our ongoing engagement.
We can also obtain further information, when we need it, through our statutory powers.
We have access to significantly more information than ever through:
- automatic exchange of rulings between different revenue authorities
- Country-by-Country (CbC) reporting – where multinational groups have to report their global structures and tax affairs by country.
We also obtain information on:
- cross-border transactions and arrangements through the International dealings schedule
- transactions and arrangements we consider high risk or of concern through the Reportable tax position schedule.
Information from the International dealings and Reportable tax position schedules helps us understand tax risks at the taxpayer and population level.
We have statutory powers to deal with multinational groups that seek to obscure their global operations. Under the diverted profits tax, we can issue an assessment at a 40% tax rate (payable upfront) where profits are being shifted to low tax jurisdictions without the necessary economic substance. This increases the pressure on multinational groups to be upfront about their global structures and provide information to us voluntarily.
For more information see Publicly available data to help understand tax compliance.
Dispute prevention and resolution
We aim to prevent disputes but when they arise we work to resolve them as early as possible
Corporate taxation is complex, especially when applied to large corporate groups. This can lead to differences in opinion between us and taxpayers on how the law applies.
Sometimes a large corporate group will prefer to proceed to dispute rather than accept what they might see as an adverse audit outcome. When such disputes arise, we may apply alternate dispute resolution processes. This can include:
- early neutral evaluation methods
- agreeing to a settlement.
Settlements are an important part of the administration of the tax system. They allow us to exercise discretion and good sense in balancing competing priorities. This helps us meet our obligation to administer the tax system efficiently and effectively.
We recognise the community are interested in knowing settlements are appropriate. This is why we provide information about our settlement processes and have an independent assurance process in place.
We also recognise a settlement isn’t always appropriate. Sometimes litigation is essential to ensure the health of the tax system.
For more information see Managing disputes with large corporate groups.
We use both one-to-one and one-to-many approaches to assist large corporate groups and assure the community they are complying with their tax obligations.