Many countries around the world have expressed concerns about tax havens, and it comes as no surprise when major companies and high-net-worth individuals fight growing regulations. In Australia, there is a push to divulge the companies that are relying on tax havens, something major accounting firms are actively fighting back against.
The proposal being fought by accounting firms comes from the Board of Taxation of the Federal Government. As part of its efforts to increase transparency, this board proposed divulging which companies sit by the top of the list of tax havens. Specifically, it would indicate if a company leads in the Australian Taxation Office’s list of most risky taxpayers. The Tax Transparency Code was first introduced to the 2015 federal budget by Joe Hockey, the former treasurer. Now, the question becomes whether changes should occur.
Why Changes Are Proposed
The Tax Transparency Code already in existence is fully voluntary. It lets companies that have over $100 million in annual turnover to disclose additional tax information in financial reports, websites, and annual reports. Many major international tech giants, such as Microsoft, Apple, and Facebook, do not participate. Critics feel that due to the voluntary nature of the code, it is not very useful. Specifically, the Tax Justice Network says that the voluntary disclosures allow for veils of secrecy.
Those in favor of the proposed changes want the relevant tax code to be changed so companies are required to provide additional tax information. Specific information they want to see required includes listing all entities within a company, listing the amount of tax paid, and indicating where the taxes go.
The Argument Against the Proposal
KPMG is one of the major four accounting firms that are responsible for advising multinationals as well as Australian companies on tax structures. This firm feels that disclosing if a company is near the top of the list from the Australian Taxation Office (ATO)’s risky taxpayers would not actually serve any purpose.
Furthermore, KPMG argues that for changes to the code to be implemented, the government has to first set out a definition of a tax haven. The discussions all center around no-tax jurisdictions and low-tax jurisdictions, but KPMG argues that these have not been defined officially.
KPMG further indicated concerns from corporate clients regarding ATO actions against them as well as any ongoing tax disputes. The accounting firm also shared worries that the risk ratings would have little to no value to the general public and have the potential to be very misleading.
There Is Still a Push for Transparency, Especially with Tax Havens
The Tax Justice Network actually wants to go even further than the proposal, requiring mandatory reporting containing detailed tax information. The network specifically had issues with the fact that the voluntary code does not help the average person understand if profits get taxed in situations with created economic value. The lack of verification of information or penalties for misleading and false reports is also concerning to the network.
For now, companies using tax havens in Australia still only have voluntary reporting requirements, but this is something that may change in the future, so those with an interest should keep an eye on the situation.
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