Australia looks set to amend its country-by-country reporting rules to gather more tax data on multinational companies and make global information publicly available.
Stakeholders now have just over two weeks to comment on the proposal to make CbCR public. The Australian Treasury opened a three-week public consultation after publishing the draft bill last Thursday, April 6.
Geoff Gill, transfer pricing leader at Deloitte Australia in Sydney, thinks the Australian government is hoping to change taxpayer conduct.
“The main goal of the Australian government appears to be that greater transparency into multinational companies’ global tax profiles will help incentivise sustainable tax practices and change behaviour,” he told ITR.
All multinational companies with operations in Australia would have to publish their CbCR data under these changes, including key details about their global activities and tax structures.
Jock McCormack, head of tax at DLA Piper in Sydney, said the draft bill reflects the government's aims to enhance corporate transparency. “This is an important departure from the original CbCR design features.
“Reporting entities should ensure that their relevant information is accurate and up-to-date, including information specifically related to main business activities, intangible assets, effective tax rates, and certain related party dealings,” said McCormack.
The Global Reporting Initiative (GRI) 207 tax standard was used as a disclosure model to amend CbCR. However, the GRI 207 is a voluntary policy framework for multinational companies whereas the Australian proposal would be mandatory.
This is just one way in which it goes further than the GRI.
“The required information extends beyond GRI 207 in a number of key aspects particularly relating to information on intangible assets, effective tax rates and expenses from related party transactions,” said Gill.
“The inclusion of this data is a significant break as it will introduce additional complexity and cost for companies to prepare and provide the data,” he explained.
“For example, providing a list of intangible assets on a country-by-country basis may be a difficult challenge for many companies given the dynamic nature of these assets.”
A growing list of multinational groups, including tech companies Amazon and Cisco Systems, have faced pressure from investors to adopt the GRI standard. But, so far, very few businesses have implemented public CbCR.
Politics of going public
Australia may be the first country to implement public CbCR on worldwide activities, but it’s not the only jurisdiction considering greater tax transparency. EU member states have until June 2023 to turn public CbCR into national legislation, and some like Romania are ahead of the game.
Liam Telford, national tax technical director at RSM Australia in Perth, said the draft bill is much broader than the EU directive. For example, the draft requirements include commercially sensitive information such as listing offshore intangible assets by country.
Telford also suggested that the short timeline is not long enough to settle the final details.
“It is difficult to see how the Treasury would have sufficient time to give due consideration to the likely detailed submissions they will receive on the changes.
“There is only nine weeks for final legislation to be prepared, introduced into Federal Parliament – which will also be considering a federal budget during this period – sent to committee for consideration, debated and passed,” said Telford.
The draft bill will have to go through the full legislative process before July 1, when it is set to come into effect. However, Parliament is not sitting for the federal budget until May 9 to 11 so the next opportunity for a vote would be between June 13 and June 22.
Not all tax professionals are worried about the timeline, as the proposal was announced in October 2022. “Businesses have had several months to prepare for this initiative,” said McCormack.
Several NGOs have praised the Australian proposal to establish public CbCR, including the Centre for International Corporate Tax Accountability (CICTAR) and the Financial Accountability and Corporate Transparency (FACT) Coalition. These organisations have been lobbying for greater tax transparency for many years.
Jason Ward, principal analyst at CICTAR in Australia, said: “This move will increase transparency and accountability and shine a bright light on where and how multinationals shift profits.
“Exposure of current practices will encourage an end to abusive tax schemes everywhere,” he added.
Ian Gary, executive director of the FACT Coalition, called the proposal a “game changer in the fight for a fairer, more transparent international tax system”.
Prime Minister Anthony Albanese won the 2022 federal election partly on a platform to introduce greater tax transparency in Australia.
His government moved quickly to start working on a proposal to make CbCR public – it was first announced in October 2022 following another consultation on tax transparency held from August to September.
This was a break with OECD standards because BEPS Action 13 maintains that such information should not be made public.
Nevertheless, Australia may be about to become the first country to implement public CbCR on a worldwide basis. A final bill is expected to gain approval by the Parliament of Australia in June, as the Albanese government has enough support.
