Corporate Tax Transparency Report Highlights Trend of Voluntary Compliance

The publication by the Australian Taxation Office (ATO) of the Seventh Annual Corporate Tax Transparency Report shows the trend towards better voluntary tax compliance among large companies.

Deputy Commissioner Rebecca Saint explained that the report reflects the ATO’s intensive engagement with the top of the city in recent years.

“Although the taxes paid by this population may fluctuate from year to year, the general trend is very clear. Businesses are placing greater emphasis on tax compliance, fostering consistent and voluntary voluntary participation, ”said Ms. Saint.

The Tax Avoidance Task Force (the Task Force) has had a significant impact on corporate tax collection. Since its creation in 2016, the working group has been very successful. In addition to helping the ATO collect more than $ 10 billion in additional taxes from public companies and multinationals, it has improved tax compliance.

The resources of the task force have enabled the ATO to establish the Justified Trust program, which requires the largest companies to ensure that they are paying the correct amount of tax based on objective evidence.

“This is a significantly higher level of review than the previous approach to investigating the identified risks,” said Ms. Saint.

“Our Top 100 reports show that the number of taxpayers with a high insurance rating increased from 6% in 2019 to 49% in 2021. We attribute this to a combination of companies recognizing that investing in their governance tax has a tangible impact on real-world benefits – as well as a significant investment of time and resources by the ATO in scrutinizing tax governance structures, transactions and frameworks. ‘

“The health of the tax system depends on voluntary participation, as evidenced by four of Australia’s top five companies with a high or medium insurance rating.”

“Low assurance scores prompt the ATO to conduct full and intensive reviews where we are more likely to use audits to resolve issues. “

“While we cannot disclose insurance ratings for individual taxpayers, we note that many use a justified confidence rating as a key performance indicator. We see companies with “high insurance” tax ratings educating their shareholders, employees and other stakeholders. “

The Corporate Tax Transparency Report also shows that the proportion of companies that paid no income tax remains stable at 33% in 2019-2020. This reflects a decrease from 36% since the first report in 2013-14.

It is important to note that the data in the report is taken directly from the tax returns and does not reflect any intervention or compliance work after the returns are filed.

There are many reasons why businesses do not pay income tax. Income tax is paid on profits and not on income and there are legitimate business or economic factors that may cause companies not to pay income tax due to operating losses, use of losses from previous years or projects in the process of starting up.

Many individual entities that have not paid tax are members of a group of taxable companies. At the level of economic groups, a total of 2,061 economic groups or autonomous entities were to some extent affected by the transparency report. Of these, 78% were subject to tax through one or more member entities.

“The ATO actively checks that the losses in the large market are not created by artificial plans, but can be attributed to business operations. We subject companies that report year-over-year losses to further scrutiny, ”said Ms. Saint.

Corporate tax transparency report

The ATO is required by law to publish each year the tax information communicated to us by certain large companies. This year’s tax transparency report covers 2,370 legal entities, including:

  • 1,378 are foreign companies with revenues of $ 100 million or more
  • 513 are Australian public entities with income of $ 100 million or more
  • 479 are Australian resident private companies with income of $ 200 million or more.

The companies in the report paid a combined total of $ 57.2 billion, or about 65% of all corporate taxes in 2019-20.

Since the first report in 2013-14, there has been growth in total income, taxable income and income tax payable. In 2019-20, the growth of these amounts was largely driven by the mining sector, which accounted for around 44% of taxes payable.

While the report reflects the impact of the early stages of the COVID-19 pandemic (particularly on the wholesale, retail and service industry), it does not provide additional details on JobKeeper’s beneficiaries or other stimulus payments.

Oil and gas sector

The highly concentrated taxpayer base of the Petroleum Resources Rents Tax (PRRT) allows a high level of control over ATOs. 12 companies paid $ 881 million in 2019-2020, a slight decrease from compared to the $ 1.06 billion paid by 11 companies in 2018-19. The decline in PRRT is mainly due to lower oil prices.

Tax performance of large groups

Most large corporations do the right thing and pay the right amount of tax, as evidenced by our estimate of the large corporation tax gap.

For 2018-2019, we estimate a net variance of 4.3% or $ 2.6 billion after the ATO commitment, which means that large business groups paid more than 95% of the total amount. theoretical income tax payable in 2018-2019.

“Very few other tax authorities calculate and publish tax differences. This makes international comparisons difficult, but Australians can be reassured that large corporate groups are held more accountable than any other sector of the economy, ”said Ms. Saint.

/Press release. This material from the original organization / authors may be ad hoc in nature, edited for clarity, style and length. The views and opinions expressed are those of the author (s). here.

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