By Doug Connolly, Multinational Corporate Taxation
The Australian Taxation Office says its latest annual report corporate tax transparency report, published on December 10, shows that voluntary tax compliance for large companies is improving. In this regard, the ATO points out that, as part of a recently launched compliance program, the percentage of large companies with a “high assurance” rating increased from just 6% in 2019 to 49% in 2021.
“Businesses are placing greater emphasis on tax compliance,” said ATO Deputy Commissioner Rebecca Saint, “resulting in consistent and voluntary voluntary participation”.
ATO attributes improvements in compliance to the work of the Tax Avoidance Task Force, which it says has helped collect more than AUD 10 billion (USD 7.2 billion) in additional taxes from state-owned enterprises and multinationals.
Enhanced tax compliance program for large businesses
With the resources of the Tax Avoidance Task Force, the ATO implemented the “Good Trust” program, whereby some large companies must demonstrate that they are paying the correct amount of tax with objective evidence. . ATO introduced the program in 2015 for the “Top 100”.
The Top 100 consists of state-owned and multinational companies identified by the ATO on the basis of the importance of their economic activity and fiscal responsibility in Australia. The population changes annually and does not necessarily add up to 100 (eg, there were 77 in the “Top 100” in 2000).
The third annual edition of the ATO Top 100 report on the program showed an increase in the percentage of taxpayers scoring “high insurance” – from 6% in 2019 to 49% in 2021. About 30% more received a “medium insurance” rating, bringing the total with a medium or high rating. about 80% insurance ratings.
“We attribute this,” Saint explained, “to a combination of companies recognizing that investing in their tax governance has tangible real-world benefits – as well as a significant investment of time and resources by the ATO in review of tax structures, transactions and governance frameworks.
For the top 100 companies receiving “low assurance” scores in the program, ATO undertakes full reviews and is likely to conduct audits.
ATO does not disclose individual taxpayer ratings, but some companies may choose to disclose their positions. “We are seeing companies with ‘high insurance’ tax ratings informing their shareholders, employees and other stakeholders,” Saint said.
Other corporate tax measures
The ATO estimates the tax gap for groups of companies (i.e. the taxes that companies theoretically owe but have not paid) at 4.3% of the taxes due, or 2.6 billion AUD (1.9 billion USD), after the ATO commitment.
Of the more than 2,000 entities examined in the Tax Transparency Report, a third (33%) paid no income tax in the past year. However, the ATO cautions that there are several reasons why businesses may not pay income tax, including lack of profitability or loss carryforwards. In addition, this number only reflects the information from the declarations filed, before any other compliance or action by the ATO.
The companies examined in the annual transparency report accounted for around two-thirds (65%) of all corporate income taxes paid in Australia in the past year. The companies examined included 1,378 foreign companies with income of at least AUD 100 million (USD 71.6 million), 513 Australian public entities with income of at least AUD 100 million and 479 Australian resident private companies with income of at least AUD 200 million (USD 143 million).