Top corporate players sign up for voluntary tax code
Twenty of the nation’s largest companies have voluntarily signed up to a comprehensive new code to disclose more details of their tax affairs in their latest ¬annual accounts following a series of scandals involving local and offshore firms.
In the May budget, the federal government announced it was committed to a new voluntary Tax Transparency Code for large businesses in a bid to give the public a better view of the tax affairs of the corporate sector.
The government’s key tax adviser, Michael Andrew, said the aim of the code was to “make sure the man in the street understands which companies are paying their fair share of tax and which ones aren’t”.
“Twenty of the largest companies in Australia have already signed up on our website and indicated they are going to adopt,’’ Board of Taxation chairman Michael Andrew told The Australian.
Notably the list includes ¬mining giants Rio Tinto and BHP Billiton, which have just faced a fresh Australian Taxation Office crackdown on their sales hubs in Singapore, through which they ¬funnel billions of dollars.
Like the Transparency Code, the ATO’s Singapore move is designed to get companies to voluntarily reduce the amount of profits they claim their offshore arms are generating. For the first time, the ATO is using colour coding to tell companies what it thinks of their tax arrangements.
Mr Andrew said other big companies to have signed up to the new transparency code include NAB, ANZ, Transurban and Cochlear.
The Board of Taxation website also reveals companies including Wesfarmers, AMP, Fairfax Media, Woodside, Iluka, Mirvac, Orica, Seek, Vicinity Centres and Treasury Wines have signed up to the code for their 2016 accounts.
Stockland and Telstra have stated they will comply from financial 2017.
Mr Andrew said those firms that failed to comply with the voluntary code were more likely to be targeted by the ATO after the federal government introduced a new diverted profits tax in the May budget to hit companies that sought to avoid their Australian tax obligations.
“A voluntary code gives you a better result. It goes straight into the boardroom — boards want to understand why there is a variation (on their tax affairs) when they are putting that information out, whereas if it is compulsory, it will be done by the tax manager and be simply a tax compliance exercise,’’ he said.
“It allows a better targeting of where the ATO should actually be looking around diverted profits tax. You will see organisations like the Tax Justice Network and the ATO focusing in on the ¬people that don’t provide this ¬information.’’
It comes after the Board of Taxation provided a report to the government in February on a proposed voluntary tax transparency code it said would evolve over time in response to changes in corporate governance practices, the legal and commercial environment and developments in global tax transparency initiatives.
Under the code, so-called medium businesses with turnover of between $100 million and $500m are required to provide a reconciliation of their accounting profit to tax expense and to income tax paid or income tax payable and any differences.
They must also provide the effective company tax rates for their Australian and global operations.
In addition, companies with turnover of more than $500m are required to provide commentary on their approach to tax strategy and governance, a tax contribution summary for corporate taxes paid and information about international related-party dealings. ‘’It also looks at the actual amount of tax you contribute to the Australian economy — both direct and indirect,’’ Mr Andrew said.
He said the Corporate Tax¬payers Association, the Business Council of Australia and the Australian Industry Group had all recommended to their members to adopt the code and had conducted surveys with their members indicating there will be a high level of take up.
Importantly the code applies to privately owned Australian companies, as well as foreign-owned and public companies operating in Australia.
Mr Andrew said a number of multinationals including Exxon and BP had indicated they would comply with the code.
“This is also about public pressure. You are already seeing multinationals responding to this by bringing offshore operations ¬onshore to make sure they pay their fair share of tax. Google is doing that, and that is a response to the transparency discussion,’’ Mr ¬Andrew said.