Australia delays plan to implement public CbCR

The Australian government missed its own deadline to legislate for mandatory public country-by-country reporting yesterday, June 22, but the proposal is still on the political agenda.

Andrew Leigh, assistant minister for competition, released a statement today, stressing that the Treasury will continue to work with industry stakeholders on the proposal.

“Over the coming months, we will further engage on the appropriate level of disaggregated reporting. This will build on refinements we have already made to align more closely with the European Union’s public country-by-country regime,” he explained.

This is a change from the earlier proposal for public CbCR, which would have gone much further than the EU version.

Under the original proposal, multinational companies making more than A$1 billion ($66.7 million) a year from operations in Australia would have to publish their CbCR data. This would include key details about their global activities and tax structures.

A final bill was expected to go through Parliament in June since the proposal was scheduled to come into effect on July 1. However, Parliament has closed its doors for a break before the next session begins in more than a month.

There are now claims from NGOs that the OECD has been lobbying for the Australian government to reconsider its ambitious proposal. Originally, the government wanted to impose mandatory public reporting on worldwide assets. This would go much further than EU and OECD plans.

Alex Cobham, chief executive at the Tax Justice Network, argued that the Australian proposal does not conflict with OECD standards.

“The suggestion that the OECD interfered in a country’s decision to promote tax transparency is extraordinary, and the organisation must provide a full, public explanation of its role here,” said Cobham.

The Centre for International Corporate Tax Accountability and Research (CICTAR) has warned that the government should not dilute its original proposal.

Jason Ward, principal analyst at CICTAR in Sydney, said: “The Albanese Labor government should not bend to corporate bullying and must enact this landmark transparency legislation as soon as possible, without watering it down.”

Ward has also claimed that the OECD has lobbied Australian officials to water down the tax transparency proposal.

ITR has contacted the OECD for comment about these claims.

Prime Minister Anthony Albanese won the 2022 federal election partly on a platform to introduce greater tax transparency in Australia.

The Albanese 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.

Another consultation was held in April 2023 giving taxpayers just three weeks to comment. 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.

Some companies such as energy group BP have adopted the GRI standard. BP submitted its own letter to the April consultation and recommended that the government follow the EU or OECD approach to public CbCR.

Bill Barton, public officer at BP Australia based in Melbourne, said: “Such an approach would avoid disproportionate compliance burdens for taxpayers, without undermining the policy intent of the proposal.”

He added that this would also help “mitigate the risk of stakeholder misunderstanding” of different disclosures around the world.

The Australian government is listening to tax directors hoping that the government will reconsider this approach for the sake of compliance and risk management.

Parliament will be back in session on July 31. The Albanese government is expected to continue its work on public CbCR and other tax reforms.