Australia Foresees Higher MNEs’ Voluntary Tax Compliance Rate

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Australia has reported a voluntary tax compliance rate of 91 percent on the tax contribution made by large companies and multinationals in the country and projected that revenues would increase significantly as a result of a raft of new legislation brought in to encourage multinationals to drop aggressive tax planning arrangements.

The figures were reflected in the latest Australian Tax Office’s corporate tax transparency report for 2015–16 which covers 1,693 Australian public and foreign-owned companies with an income of AUD100 million (USD75m) or more, and 350 Australian-owned resident private companies with an income of AUD200 million or more.

The affected companies pay around 60 percent of total company income tax that was payable in 2015-16. That year, they paid AUD38 billion.

A news report sourced from quoted Deputy Commissioner, Jeremy Hirschhorn, as saying that Australian taxpayers should have confidence that the largest companies are being required to pay the right amount of tax on their Australian profits, and most do so voluntarily.

Hirschhorn explained: “Australia has one of the strongest corporate tax systems in the world. In 2014–15, large corporate groups paid 91 percent of their tax due voluntarily, with a further three percent raised through ATO compliance activities. Although this is world-leading performance, we are resolute in further increasing this level of compliance.”

Recently, the Australian government has introduced a number of new legislative provisions to tackle tax evasion and avoidance by multinationals, including establishing a Tax Avoidance Taskforce, introducing a multinational anti-avoidance law (MAAL), a diverted profits tax (DPT), and a country-by-country reporting framework.

The Deputy Commissioner projected that Australian revenues from these companies would increase considerably in next year’s report, including as a result of the MAAL.The Government said last April that it was auditing 59 multinational companies and of the 175 taxpayers that the tax agency had met with to discuss tax compliance matters, 25 had agreed to restructure their tax affairs.

Hirschhorn clarified further: “In the last financial year alone, we issued more than AUD4bn in amended assessments relating to prior years to public groups and multinationals, and we have already issued a further AUD1bn in amended assessments this financial year. These amounts are not reflected in the corporate tax transparency data.

“Many companies provide significantly more detailed information through the Board of Taxation’s Voluntary Tax Transparency Code. The ATO strongly encourages companies that have not yet signed up to do so.”

“On the back of solid growth in company profits and higher commodity prices, we are seeing a strong increase in company tax collections in 2016–17, which will be reflected in the data next year. In addition, we expect to begin to see the impact of the MAAL in the 2016–17 data as companies restructure to comply with the requirements of the new law.

“In the coming years, the data will reflect an estimated AUD7bn each year of increased sales returned in Australia as a result of the operation of the MAAL and will also reflect restructures made by companies to avoid paying the DPT. Increasingly, the data will also reflect our approach to resolving past matters in requiring future compliance to be ‘locked in”, the tax administrator added.

The MAAL came into effect on 1st January last year and it applies to multinationals operating in Australia with global revenues of more than AUD1bn, and requires companies that “avoid” taxes to pay back double what they owe, plus interest.

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