Businesses have until April 28 to comment on proposals to make public CbCR reporting mandatory. According to sources, these reforms will change the game.
Australia appears prepared to change its country-by-country reporting requirements in order to collect more tax information on multinational corporations and make global data available to the public.
The plan to make CbCR public is now open for comments, and stakeholders have just over two weeks to do so. The draft bill was released last Thursday, April 6, and a three-week public consultation was immediately launched by the Australian Treasury.
The transfer pricing leader at Deloitte Australia in Sydney, Geoff Gill, believes that the Australian government is trying to influence how taxpayers behave.
According to him, "he main goal of the Australian government appears to be that greater transparency into multinational companies’ global tax profiles will help incentivise sustainable tax practices and change behaviour."
Under these reforms, all multinational corporations with operations in Australia would be required to publish their CbCR data, which would include important information about their international operations and tax arrangements.
CbCR was modified using the Global Reporting Initiative (GRI) 207 tax standard as a disclosure model. The Australian plan would be required, whereas the GRI 207 is a voluntary policy framework for international corporations.
This is but one example of how it exceeds the GRI.
"The required information extends beyond GRI 207 in a number of key aspects particularly relating to information on intangible assets, effective tax rates and expenses from related party transactions," claimed Gill.
"The inclusion of this data is a significant break as it will introduce additional complexity and cost for companies to prepare and provide the data,," he said.
"For example, providing a list of intangible assets on a country-by-country basis may be a difficult challenge for many companies given the dynamic nature of these assets."
Investor pressure has increased on a rising number of global corporations, including internet giants Amazon and Cisco Systems, to adopt the GRI standard. But only a small number of companies have used public CbCR to date.
Australia may be the first nation to implement public CbCR on international activities, but it's not the only country or region that is thinking about enhancing tax transparency. Some EU member states, like Romania, are ahead of schedule and have until June 2023 to enact public CbCR into national law.
The proposed bill is significantly more comprehensive than the EU directive, according to Liam Telford, national tax technical director at RSM Australia in Perth. The proposed standards, for instance, disclose offshore intangible assets by nation and other economically sensitive data.
Telford added that the brief time frame is insufficient to resolve the specifics.
"It is difficult to see how the Treasury would have sufficient time to give due consideration to the likely detailed submissions they will receive on the changes."
"There is only nine weeks for final legislation to be prepared, introduced into Federal Parliament – which will also be considering a federal budget during this period – sent to committee for consideration, debated and passed," according to Telford.
Before taking effect on July 1 as planned, the proposed bill must go through the entire legislative procedure. The next opportunity for a vote would be between June 13 and June 22 because Parliament won't meet until May 9 to May 11 to discuss the federal budget.
The Centre for International Corporate Tax Accountability (CICTAR) and the Financial Accountability and Corporate Transparency (FACT) Coalition are two NGOs that have applauded the Australian proposal to establish public CbCR. For many years, these organizations have lobbied for increased tax transparency.
"This move will increase transparency and accountability and shine a bright light on where and how multinationals shift profits.," said Jason Ward, principal analyst at CICTAR in Australia.
"Exposure of current practices will encourage an end to abusive tax schemes everywhere," he continued.
The plan has been called a "game changer in the fight for a fairer, more transparent international tax system" by Ian Gary, executive director of the FACT Coalition.
The 2022 federal election was won in part by Prime Minister Anthony Albanese on a campaign to increase tax transparency in Australia.
His administration moved swiftly to begin developing a proposal to make CbCR public; it was first made public in October 2022 as a result of another tax transparency survey that took place in August and September.
Because BEPS Action 13 argues that such information should not be made public, this was a deviation from OECD rules.
Nevertheless, Australia might soon be the first country to introduce public CbCR globally. The Albanese government has enough backing, thus the Australian Parliament is anticipated to pass a final bill in June.
By fLEXI tEAM