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  • ATO statement on corporate tax

    Australia has one of the strongest corporate tax systems in the world. We have one of the strongest compliance programs which, on any measure, is as good as anywhere in the world.

    The ATO wants the community to have trust and confidence that the ATO is taking action to ensure the largest companies are required to pay the right amount of tax on their Australian profits and most do so voluntarily. The ATO is better equipped than ever before to fulfil its commitment to further increasing the level of compliance by large companies.

    We have been funded $679.9 million over four years for the Tax Avoidance Taskforce, which has allowed us to significantly expand our compliance approaches with large companies through one-on-one intensive engagement with the:

    • Top 1000 multinational and public companies
    • Top 320 private groups and the high wealth individuals who control them.

    Between them, these groups pay about two thirds of all corporate tax in any given year.

    Our compliance and enforcement results have also benefited from the introduction of new laws, including the Multinational Anti-Avoidance Law (MAAL) and the Diverted Profits Tax, the strengthening of transfer pricing laws and the general anti-avoidance powers, and the sharing of country-by-country (CbC) reports between countries. These are already having a significant effect.

    Since the establishment of the MAAL in December 2015 we have already seen 38 companies restructure and $7 billion of additional income being booked in Australia that previously wasn’t.

    Measures such as CbC reporting will also provide us a broader picture of compliance behaviour from 2017 onwards. In fact, tomorrow (15 February) we will be receiving the first substantial tranche of CbC information from multinational companies which will provide us with an in-depth view of their global structure, operational and economic activity. We recognise that transparency of tax affairs is a fine balance as some of the information the ATO receives, through measures such as CbC reporting, are only made available to the ATO by other countries through a multi-lateral instrument that requires the information to be held confidentially by revenue authorities.

    For the past three years the ATO has released corporate tax transparency data which includes some tax information of more than 2,000 large companies operating in Australia. The most recent data set for 2015-16 was released in December 2017.

    In reviewing the data, there can be a disproportionate focus on the number of groups which paid either no tax or small amount of tax relative to gross income. As we are trying to build trust and confidence in the system for all taxpayers, it is important to remember that:

    • corporate income tax is payable on profits, not gross income
    • profits for tax purposes are closely linked to realised earnings, not paper earnings
    • in any given year a significant percentage of even the largest companies make losses, not just for tax purposes, but also for accounting purposes
    • it reflects the tax returns as lodged, and does not reflect subsequent ATO compliance activity.

    While information included in the corporate tax transparency report may be new to the community, it’s not new to the ATO. The ATO has access to far more detailed information and regularly engages with these large companies to assure their tax behaviours, with a particular focus on companies which make sustained losses.

    Importantly the data only reflects tax returns as lodged. Since 1 July 2016 the ATO raised liabilities in excess of $5 billion against public groups and multinational corporations, not reflected in these releases.

    Last modified: 14 Feb 2018QC 54563