2013-2014-2015

THE PARLIAMENT OF THE COMMONWEALTH OF AUSTRALIA

HOUSE OF REPRESENTATIVES

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TAX LAWS AMENDMENT (cOMbating multinational tax avoidance) bill 2015

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SCHEDULE OF THE AMENDMENTS MADE BY THE SENATE TO WHICH THE HOUSE OF REPRESENTATIVES HAS DISAGREED

(1)     Page 2, clause 2 (table item 1), omit the table item, substitute:

 

1.  Sections 1 to 3 and anything in this Act not elsewhere covered by this table	The day this Act receives the Royal Assent.
2.  Schedules 1 to 4	The day after this Act receives the Royal Assent.
3.  Schedule 5, Parts 1 and 2	The day the Tax and Superannuation Laws Amendment (Better Targeting the Income Tax Transparency Laws) Act 2015 receives the Royal Assent.
4.  Schedule 5, Part 3	The day after this Act receives the Royal Assent.

(2)     Schedule 1, page 7 (before line 10), before item 5, insert:

4A  After section 3C

Insert:

3D   Reporting of information about significant global entities

             (1)  This section applies to a corporate tax entity for an income year if the entity is a significant global entity (within the meaning of the Income Tax Assessment Act 1997 ) for the income year.

             (2)  The entity must, as soon as practicable after the end of the income year, give the Commissioner a general purpose financial report for the income year.

 

             (3)  For the purposes of this section, a general purpose financial report must be prepared and audited in relation to the entity in accordance with:

                     (a)  accounting principles and auditing principles; or

                     (b)  if such principles do not apply—commercially accepted principles, relating to accounting and auditing, that ensure the statements give a true and fair view of the financial position and performance of that entity (or that entity and the other entities on a consolidated basis).

An expression used in this subsection that is also used in the Income Tax Assessment Act 1997 has the same meaning as in that Act.

             (4)  The Commissioner must give a copy of the report to the Australian Securities and Investments Commission.

(3)     Page 17 (after line 3), at the end of the bill, add:

Schedule 5 — Reporting of information about corporate tax entities

   

Part 1 — Repeal of Act

Tax and Superannuation Laws Amendment (Better Targeting the Income Tax Transparency Laws) Act 2015

1  The whole of the Act

Repeal the Act .

Part 2 — Application

2  Application

(1)       This item applies if the Tax and Superannuation Laws Amendment (Better Targeting the Income Tax Transparency Laws) Act 2015 receives the Royal Assent before this Schedule commences.

(2)       Despite section 7 of the Acts Interpretation Act 1901 , the Taxation Administration Act 1953 as in force immediately before that Royal Assent continues to apply, by force of this item, as if the amendments made by the Tax and Superannuation Laws Amendment (Better Targeting the Income Tax Transparency Laws) Act 2015 had never been made.

Part 3 — Reporting of information

Taxation Administration Act 1953

3  Subsection 3C(2)

Omit “The Commissioner”, substitute “Subject to subsection (2A), the Commissioner”.

4  After subsection 3C(2)

Insert:

          (2A)  If:

                     (a)  an entity applies to the Commissioner in writing; and

                     (b)  at the end of the income year the entity is an Australian resident that is a private company for the income year that neither:

                              (i)  is a member of a wholly-owned group that has a foreign resident ultimate holding company; or

                             (ii)  has a foreign shareholding percentage of 50% or greater; and

                     (c)  the Commissioner is satisfied that to make the information publicly available may be significantly prejudicial to any of the entity’s current or future commercial negotiations;

the Commissioner may determine that subsection (2) does not apply in relation to the entity. An expression used in this subsection that is also used in the Income Tax Assessment Act 1997 has the same meaning as in that Act.

          (2B)  A determination under subsection (2A) is not a legislative instrument.

5  After subsection 3C(3)

Insert:

          (3A)  The Commissioner must ensure that the information made publicly available under subsection (2) includes:

                     (a)  a statement to the effect that:

                              (i)  the information may not reflect the full financial position of the entity; and

                             (ii)  more comprehensive information may be available from the Australian Securities and Investments Commission; and

                     (b)  the address for the part of the Australian Securities and Investments Commission’s website via which the information referred to in subparagraph (a)(ii) may be found.

 

6  Application of amendments

The amendments made by this Schedule apply in relation to an entity for the 2013-14 income year and each later income year unless the Commissioner has, before the commencement of this Schedule, made publicly available information about the entity for the income year under subsection 3C(2) of the Taxation Administration Act 1953 .

 

HOUSE OF REPRESENTATIVES REASONS FOR DISAGREEING

TO THE SENATE AMENDMENTS

                     

The House of Representatives does not support the Senate amendments to the Tax Laws Amendment (Combating Multinational Tax Avoidance) Bill 2015 .

The Bill that was passed by the House of Representatives is an important piece of legislation. It builds on the work the Government led in the G20 and OECD to ensure that multinationals pay their fair share.

The Bill will:

• ensure that multinational companies with significant activities in Australia that use artificial arrangements to book their revenue offshore pay the right amount of tax in Australia on their Australian activities;
• increase penalties for tax avoidance and profit shifting by large multinational companies; and
• ensure that the ATO has access to detailed information on large multinationals to undertake targeted assessments of transfer pricing risk.

The Senate has made three amendments to the Bill.  These amendments have been made without thorough consultation, and without any detailed analysis of how many companies will be affected. These amendments are made without input from Treasury and the Australian Taxation Office, without proper analysis of the regulatory burden they will impose, and without consideration of whether they can be sensibly administered by the Australian Taxation Office.

Amendments (1) and (3)

These amendments repeal the Tax and Superannuation Laws Amendment (Better Targeting the Income Tax Transparency Laws) Act 2015 , which was passed by both Houses of Parliament last month.  The amendments instead provide the Australian Taxation Office with a discretion to prevent the disclosure of the tax information of large Australian-owned private companies if it considers that the release of such information would be prejudicial to that entity’s commercial negotiations.

The intention of this Bill is similar to the intent of the House of Representatives in passing the Tax and Superannuation Laws Amendment (Better Targeting the Income Tax Transparency Laws) Act 2015 .  That is, to balance the need for greater public transparency in the tax affairs of large companies while not jeopardising the privacy and competitiveness of Australian owned private companies.

However, requiring the Commissioner of Taxation to assess whether the release of tax information may be prejudicial to an entity’s commercial negotiations is inappropriate.  The Tax Office is not equipped with the expertise to assess the commercial sensitivities of company negotiations.  The Senate amendment would require the ATO to divert resources away from its core activities, which is not in the public interest.

Amendment (2)

This amendment requires large companies to prepare and lodge with the Australian Taxation Office general purpose financial reports.  The Australian Taxation Office would be required to provide these reports to the Australian Securities and Investment Commission.

These changes result in a blunt one size fits all burden on affected companies and is likely to impose costs and excessive compliance without any tangible benefit to what was originally proposed in the Bill.

The Bill that the House of Representatives proposed will ensure that the Commissioner of Taxation has access to detailed information to undertake targeted assessments of transfer pricing risk.  These requirements have been tailor-made by the OECD to provide the best possible foundation for tax authorities to identify companies that are shifting profits and take action.  This information would supplement the extensive information already collected by the ATO in tax returns and related disclosures.  Beyond this, the Commissioner has broad powers to collect any further information that would assist in tax administration.

In contrast, much of the information required to be provided to the ATO under the Senate amendments would be irrelevant for tax compliance purposes, imposing an unnecessary cost burden on business. Such costs would be imposed on businesses that the ATO considers do not pose a significant tax risk.

For these reasons, the House of Representatives does not support the Senate’s amendments to the Tax Laws Amendment (Combating Multinational Tax Avoidance) Bill 2015 .

 

 

 

 

 

                                                                                      DAVID ELDER

                                                                      Clerk of the House of Representatives

 

House of Representatives

12 November 2015