OECD report on Limiting Base Erosion Involving Interest Deductions and Other Financial Payments Action 4 - 2016 Update

CbC reporting entities are a subset of Significant Global Entities

Economic Modelling, 2015, Volume 44, The Impact of financial distress on corporate tax avoidance spanning the GFC: evidence from Australia, pp 44-53

https://www.oecd.org/tax/beps/

Global Initiative for Fiscal Transparency, 2022, https://blog-pfm.imf.org/en/pfmblog/2022/10/developing-and-using-global-tax-transparency-principles

https://www.ato.gov.au/business/large-business/corporate-tax-transparency/

The World Bank, Innovations in Tax Compliance: Building Trust, Navigating Politics, and Tailoring Reform, 2022, https://openknowledge.worldbank.org/server/api/core/bitstreams/7225ce2e-99d7-50b7-9ae7-a640a95ae2c0/content

The ATO's Corporate Tax Transparency report, released annually, generates significant interest within the community, with commentators typically focussing on entities reporting a nil corporate tax liability. While the information in this report is sourced from tax return information, it excludes various tax return label items, such as tax losses information, from being disclosed. The exclusion of label items can hinder the general community's understanding of the tax affairs corporate tax entities, resulting in (at times) a misinformed public discourse on corporate taxation.

https://taxboard.gov.au/current-activities/corporate-tax-transparency-code-and-register

Board of Taxation, 2019, https://taxboard.gov.au/sites/taxboard.gov.au/files/migrated/TTC-Consultation-Paper-final.pdf

ATO and Treasury data: there are approximately 200 signatories to the Code out of an estimated cohort of over 3,000 entities (that could be reporting under the Code).

OECD, 2022, https://www.oecd.org/tax/tax-policy/corporate-tax-statistics-country-by-country-reporting-FAQs.pdf

OECD, 2022, https://www.oecd.org/tax/beps/common-errors-mnes-cbc-reports.pdf

Official Journal of the European Union, 2021, https://eur-lex.europa.eu/legal-content/EN/TXT/PDF/?uri=CELEX:32021L2101

KPMG, 2023, https://kpmg.com/xx/en/blogs/home/posts/2022/11/esg-scrutiny-shines-spotlight-on-tax-transparency.html

Accounting and Business Research, 2019, Volume 49, Issue 5: International Accounting Policy Forum, pp, 565-583

ATO, 2022, https://www.ato.gov.au/About-ATO/Research-and-statistics/In-detail/Tax-gap/Large-corporate-groups-income-tax-gap/

Defined as CbC reporting entity, generally an entity with annual global income of A$1 billion or more (Subdivision 815-E of the Income Tax Assessment Act 1997 ). Further information on CbC reporting can be found at: www.ato.gov.au/business/international-tax-for-business/in-detail/transfer-pricing/country-by-country-reporting/ CbC reporting entities

ATO, 2022, https://www.transparency.gov.au/annual-reports/australian-taxation-office/reporting-year/2021-22

https://eur-lex.europa.eu/legal-content/EN/TXT/PDF/?uri=CELEX:32021L2101

https://assets.kpmg.com/content/dam/kpmg/se/pdf/komm/2022/Global-Survey-of-Sustainability-Reporting-2022.pdf

https://stats.oecd.org/Index.aspx?DataSetCode=CBCR_TABLEI (Aggregate data reverse engineered)

Estimate has low reliability and has not been tested; stakeholders did not respond to questions on regulatory costs in a quantitative way. The estimate is an average-based assumption of two tax advisors with in-house charge rates of $1,000, for 5 hours, assessing the law and new obligations. It reflects prior allocative efficiencies, namely: a large population of CbC reporting entities will have already familiarised themselves with the EU Directive which has similar disclosures; these same entities already comply with OECD CbC reporting; some of these entities, including in the extractives industry, already comply with the GRI; and that MNEs generally are shifting towards enhanced corporate governance, reflected in more detailed investor material on company websites. The rates are estimates, as charge fees are generally not published.

Unlisted public company data is not published, however based on financial report lodgings with ASIC in the 12 months to 30 June 2022, we estimate around 5,750 entities are in scope. Additionally, as of 16 May 2023, there were 2,110 ASX or NSX listed Australian formed entities (public companies). https://www2.asx.com.au/markets/trade-our-cash-market/directory https://www.nsx.com.au/marketdata/directory/ .

https://www.ato.gov.au/General/Tax-and-Corporate-Australia/In-detail/Demographics-of-large-corporate-groups/

Estimate has not been tested. It is an average-based assumption of a tax advisor and an accounts auditor with in-house charge rates of $1,000, for 5 hours, assessing the law and new obligations. It reflects that in-scope entities would likely already have the requisite information and systems in place to respond. The rates are estimates, as charge fees are generally not published.

Treasury data, 2023

https://assets.kpmg.com/content/dam/kpmg/xx/pdf/2023/04/eu-public-country-by-country-reporting-latest.pdf

https://assets.kpmg.com/content/dam/kpmg/se/pdf/komm/2022/Global-Survey-of-Sustainability-Reporting-2022.pdf

Budget, October 2022-23, Budget Measures, Budget Paper No. 2, p. 15-16/196, https://archive.budget.gov.au/2022-23-october/bp2/download/bp2_2022-23.pdf

OECD (2017), Limiting Base Erosion Involving Interest Deductions and Other Financial Payments , Action 4 - 2016 Update : Inclusive Framework on BEPS , OECD/G20 Base Erosion and Profit Shifting Project, OECD Publishing Paris, p. 19. http://dx.doi.org/10.1787/9789264268333-en

https://www.ato.gov.au/law/view/document?DocID=TPA/TA20182/NAT/ATO/00001

https://www.ato.gov.au/law/view/document?docid=TPA/TA20201/NAT/ATO/00001

Burnett, C.; 2019; Interest deductibility: implementation of BEPS Action 4 and the future of transfer pricing of intragroup finance; http://ssrn.com/abstract=3459350

IRS, 2023, https://www.irs.gov/newsroom/basic-questions-and-answers-about-the-limitation-on-the-deduction-for-business-interest-expense

HM Revenue and Customs, 2022, https://www.gov.uk/guidance/corporate-interest-restriction-on-deductions-for-groups

Canada, Department of Finance, 2023; https://fin.canada.ca/drleg-apl/2022/ita-lir-1122-n-1-eng.html

Based on the assumption of 2 tax advisors per firm costing $800/hour for 8 hours. Medium-sized business typically use mid-tier tax advisory firms for tax advice. These firms typically charge slightly less than the leading advisory firms. Therefore, $800/hour has been chosen as the average charge-out rate, based on the average charge-out rate for the leading tax advisory firms (see footnote below).

Based on the assumption of 3 tax advisors per firm costing $1000/hour for 10 hours. The blended charge-out rate for specialist tax advice from leading tax advisory firms ranges from $500-$1500/hour depending on the seniority of the consultant. $1000/hour has been chosen as the charge-out rate because it is the mid-point of this range, reflecting that tax advice is typically prepared with input from consultants at a range of seniority levels and hence will be billed at a range of rates.

Based on the assumption of an 80:20 split between large and medium sized businesses affected. Charge out rates are not generally published and differ per client (weighted against bulk work, one off request etc).

Based on assumed upfront learning and education costs of $170-$900 per hour, upfront evaluation and planning costs of $900 per hour, and ongoing evaluation, planning and record-keeping costs of $170 per hour. Assumptions made based on advice from an industry expert.

See Government election commitments: Multinational tax integrity and enhanced tax transparency Consultation Paper August 2022, https://treasury.gov.au/sites/default/files/2022-08/c2022-297736-cp.pdf

See Government election commitments: Multinational tax integrity and enhanced tax transparency Consultation Paper August 2022, https://treasury.gov.au/sites/default/files/2022-08/c2022-297736-cp.pdf

Budget, October 2022-23, Budget Measures, Budget Paper No:2, p.16/196, https://archive.budget.gov.au/2022-23-october/bp2/download/bp2_2022-23.pdf