Today marks the beginning of the second year of Country by Country (CbyC) report lodgements.
Since the first CbyC reports became due in December 2017, the ATO has received 275 reports filed domestically by multinational enterprises and 2,553 reports via automatic exchange from 52 other jurisdictions. CbyC reporting requires multinationals to describe their global operations, including detailing their activities in every country in which they operate.
The Coalition have raised about $6 billion through our crackdown against multinational tax avoidance – measures which Labor voted against – which have helped fund essential services like hospitals and schools.
The ATO now gets unprecedented access to information about the global structure and activities of large multinational groups – cross-border dealings, their related party financing and intangibles transactions, and global value chains.
This information allows the ATO to better understand how and where companies make their money and to identify potential areas of tax risk.
A central feature of CbyC is the ability of tax administrators to confidentially exchange CbyC reports without the risk of publication. Publication of CbyC reports would be in breach of Australia’s confidentiality commitments under the CbyC reporting regime and could prevent the ATO from receiving exchanged CbyC reports from countries such as Canada, France, Germany, Japan and the USA.
The Commissioner of Taxation has told the Senate that CbyC reporting has been “transformational … and of enormous value! Our people think it is of enormous benefit to get that level of detail, which we’ve never had before, in a proactive way. ”
Importantly, the Coalition Government has funded the Tax Avoidance Taskforce in part to ensure the ATO has the resources to pursue non-compliance with CbyC reporting requirements.
The Coalition has significantly increased the penalties applying to multinationals for making false or misleading statements in their CbyC reports and for lodging late. In consequence, the ATO has noted it has seen very high levels of CbyC reporting compliance.
Asked at a Senate hearing what the implications would be of disclosing these reports to the public, the Tax Commissioner said simply “no-one would give us anything, so there’d be nothing to make public.”
It’s Labor policy to release CbyC reports to the public.
This would mean Australia loses one of its most important tools for countering tax avoidance by multinationals.
Why risk that?