Big companies need to tell the public how much tax they pay, says business lobby group CTA

The group that represents most of the ASX 200 on tax issues, the Corporate Tax Association, has emerged as a surprise advocate of increasing transparency about the amount of taxes big companies pay.

The Corporate Tax Association’s submission to the inquiry into corporate tax avoidance said it had concerns about existing laws that from July require the Tax Commissioner, Chris Jordan, to publish details including taxable income and tax paid by Australian public and private companies with $100 million or more turnover.

But that given those laws now existed, it was up to companies to get on the front foot and voluntarily release their tax information, it said.

The Minerals Council of Australia also believes companies should voluntarily report, noting that Rio Tinto already did this.

Other business advocates, such as the Tax Institute and accounting firms such as EY and Deloitte, are also supportive of companies reporting where they want to, but have criticised the laws because they think publicly releasing headline tax data may mislead the public. Many of them want Abbott government to scrap the laws that were rushed in by Labor before it lost government, with some even citing kidnapping concerns as a reason.

The decision about whether to retain or abandon the laws rests with the new Assistant Treasurer Josh Frydenberg. Mr Frydenberg has not said whether the government will go as far as scrapping them, but has said he thinks that publishing company information may be misleading.

Shadow assistant treasurer Andrew Leigh said while the laws require data to be made public by July, it may not actually be released until near the end of this year because of “auditing and processing delays”. “That’s if the Abbott government decides to go ahead with it at all,” Mr Leigh said.

The Corporate Tax Association (CTA) said while the current laws could lead to selective reporting of tax information by media outlets that “reflect adversely on business”, it was better to have information out in the public domain in order to have a sensible debate.

It criticised the Tax Justice Network report that was one of the reasons the federal inquiry is being held in the first place. The report, which a host of Australia’s largest companies have been criticising in their submissions to the inquiry, said that 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 0 per cent.

“The potential consequences of this kind of reporting illustrates the very valid concern that the CTA and others share around the potential consequences of company information being misused or misinterpreted,” it said. “Be that as it may, the CTA has for some time been urging its members to provide more useful and concise information about their own tax performance. Hopefully this will bear some fruit in the months and years ahead and we will see improved tax disclosures by Australian companies that go beyond what was mandated by the previous government.”

Big four accounting firm PwC also said it supported greater transparency. “PwC Australia supports increasing appropriate tax transparency in the public domain that genuinely supports a better understanding,” its submission said.

But Deloitte and EY are both worried public release of information may breach commercial confidence and increase misinformation about the taxes companies pay.

The issue of tax avoidance has dominated the political landscape both globally and in Australia over the past year. The Australian Tax Office’s submission highlights the extent of profit shifting by multinationals into low-tax jurisdictions. It found companies sent over $115 billion offshore to the low-tax jurisdictions of Singapore and Switzerland in 2012-13.

Many companies have confirmed they send profits through subsidiaries in low tax nations like Singapore.

Macquarie said the proportion of Macquarie Group’s income earned outside Australia “continues to grow and approximately 53 per cent of the company’s staff are located outside of Australia”.

“Macquarie’s effective tax rate is largely driven by the geographic location and mix of the income derived in any particular reporting period,” it said. “The group’s tax rate has been 38 per cent or higher for each of the last four reporting periods.”

It said the ATO had classified Macquarie as a “key taxpayer” – the second rather than first tier of risk that determines how aggressively the ATO monitors a company. There’s now just one company in the whole nation that is given the “higher risk” category.

Land Lease said the significant part of the difference between Lend Lease’s 10-year average effective tax rate of 21.2 per cent and the Australian corporate tax rate of 30 per cent was also partly due to the fact that it had offshore subsidiaries.

“Lend Lease has active businesses offshore and as such Lend Lease’s average effective tax rate reflects the tax rates applicable to income sourced in foreign jurisdictions, which can be lower than the Australian corporate tax rate of 30 per cent – such as Singapore’s 17 per cent and the UK’s 21.5 per cent,” it said.

It said the ATO had rated Lend Lease a “key taxpayer” and “acknowledged in writing Lend Lease’s cooperative engagement with the ATO”.

Technology giants Apple and Google have said in their submissions to the federal inquiry into corporate tax avoidance that they support international changes to global tax rules to stop profit shifting, but have warned of the risk of Australia acting alone, saying it would cost heavily in local jobs and innovation.