Announcement date
22 June 2023
Link to announcement
https://www.aph.gov.au/Parliamentary_Business/Bills_Legislation/Bills_Search_Results/Result?bId=r7057
Problem being addressed
How best to implement the Government's election commitments to improve tax transparency, while minimising burdens on taxpayers?
Primarily there is an information asymmetry issue in corporate tax disclosures, with a specific focus on multinationals (MNEs) and large businesses tax disclosures. Improved tax transparency can help to deter corporate entities from adopting arrangements to minimise their tax paid by 'holding companies to account' on their activities in a jurisdiction. The enhanced public scrutiny that increased tax transparency gives rise to is intended to support a better assessment of taxpayer activities, and the impact of those activities on the economy, including the amount of tax paid.
Proposal
The Government’s intent is to introduce targeted and balanced tax transparency initiatives directed at MNEs, that, as part of the broader regulatory mix, are intended to moderate corporate tax-aggressiveness.
This option would address information asymmetries with the current tax transparency regime by enhancing the public reporting requirements of MNEs and public companies operating in Australia via:
- Australian companies disclosing information on their subsidiaries.
- This measure was developed in place of the Government’s originally announced election commitment that companies disclose to shareholders their business in a jurisdiction with a tax rate less than 15 per cent), in response to stakeholder feedback (see consultation section).
- Separately, this option would also require tenderers for Australian government contracts (worth more than $200,000) to disclose their country of tax domicile.
- The $200,000 value is an existing threshold in the Commonwealth Procurement Framework. It is the second highest threshold.
- This element does not require legislative amendments and will instead be implemented via administrative changes to the Commonwealth Procurement material.
Please Note: the public reporting of tax information on a country-by-country (CbC) basis by MNEs is included in the IA however, while the disaggregated CbC reporting is intended to support meaningful improvements to tax transparency disclosures, there is a recognition that further consultation with industry may be beneficial on this element of the measure. The government will progress this work over the coming months.
Assessed Impact Analysis outcome
Adequate
Assessment comments
The IA addresses the seven IA questions and follows an appropriate policy development process commensurate with the significance of the problem and magnitude of the proposed intervention.
To be considered ‘good practice’ as per the Australian Government Guide to Policy Impact Analysis, the IA would need additional quantification to better demonstrate a clear net benefit of the preferred option, greater detail and information on what metrics will be measured, and further depth as to how those metrics will monitor the performance of the policy against its objectives.
Regulatory burden
The Department of the Treasury estimates an increase of one-off implementation regulatory costs (annualised and averaged over 10 years) of $2.97 million for the proposed options and public country-by-country reporting.