Company bosses are held to account on their tax affairs BCA tells inquiry
The Business Council of Australia says that the Tax Office is holding company directors and management to account about their tax affairs, despite there only being one company in the nation with a top risk rating.
“There is ongoing [Australian Taxation Office] scrutiny of corporate boards,” the BCA said in its submission to the federal inquiry into corporate tax avoidance.
The main lobby group for big business also said that current laws requiring the Tax Commissioner to publish the tax details of public and private companies with more than $100 million in revenue will not necessarily boost transparency or result in more revenue being collected.
Assistant Treasurer Josh Frydenberg is currently considering whether to amend those laws after other Coalition ministers including his predecessor Arthur Sinodinos, and Finance Minister Mathias Cormann said they were looking at concerns raised, including that private business owners were worried they may be kidnapped if detailed information gets out.
“Additional company reporting will not necessarily enhance the ATO’s ability to enforce our tax laws, given its already powerful information-collecting abilities,” the Business Council said.
The Tax Office had tax treaties and 36 tax information exchange agreements, including a number with countries some consider to be ‘secrecy jurisdictions’, that it could use to privately get tax information on companies it believes may be avoiding complying with their tax obligations.
According to the Tax Office’s submission to the inquiry, there is now only one company in the nation that is deemed “higher risk”. This is down from 17 in previous years.
Higher-risk taxpayers are the focus of “real time” continuous reviews, which has been a nightmare for company chief executives and chief financial officers.
The Business Council submission notes that the Tax Office formally risk-reviews about 30 per cent of large businesses every year, but that “the majority of businesses are classified as lower risk by the ATO”. However, it said more ATO resources were going into monitoring multinationals.
The Business Council also criticised the Tax Justice Network report that showed most large companies paid well below the 30 per cent corporate tax rate.
It said company tax collections are expected to be around $70 billion this year, and that 3,000 companies account for around 70 per cent of company tax collected.
“Australia’s twelve largest taxpayers pay one-third of all company tax,” it said.
But the Tax Justice Network report, which has been referred to in a number of submissions to the inquiry by large companies, said of Australia’s largest 200 publicly listed companies, 29 per cent had an effective tax rate of 10 per cent or less, and 14 per cent had an effective tax rate of zero per cent.
The Business Council said comparing Australian tax paid, with a measure of global profits, would produce “misconceptions”.
“Australian company tax is paid on Australian taxable income,” it said. “Global profits as a measure may be of limited use, as it will reflect the profitability of a company’s total operations, including overseas operations.”
A number of companies including Microsoft channel income through hubs in countries like Singapore, thereby paying a lower tax rate.
The Business Council also warned against any action by governments to act unilaterally. It said the best way to ensure fair tax competition was to reduce the 30 per cent company tax rate.
“The United Kingdom, Japan and Spain are lowering their corporate tax rates this year to 20 per cent, around 32 per cent and 28 per cent respectively, to boost investment and growth,” it said.
