Wouldn’t it be nice to know precisely how much revenue multinational companies make in Australia and around the world just to make sure they’re not dodging tax?
That’s the system the European Union and Australia are trying to create, but not without substantial backlash from the companies and their advisers, such as PwC, which lobbied the Albanese government to delay country-by-country reporting.
The proposed changes are contained in a bill that also includes reforms to buy now, pay later financing.
Country-by-country reporting faces a significant hurdle in a Coalition amendment which would allow companies to self-declare that certain information is commercially sensitive and cannot be made public for five years.
The Tax Justice Network has written to the crossbench urging them to reject this device, warning it will “undoubtedly be abused by multinational corporations involved in tax avoidance and profit shifting”.
The assistant treasurer, Andrew Leigh, says the legislation allows companies to make the case to the Australian Taxation Office that publication of the data will cause them “commercial problems”, promising that the regulator will take a “sensible, reasoned approach”.
“What is not tenable is for companies to self-determine what would have that impact,” he told Guardian Australia.
Leigh says it will be “pretty astonishing” if the Coalition stands in the way of a “modest, sensible” reform, and notes it is a “transparency scheme that parallels the EU, where it is being implemented by conservative and progressive governments alike”.
The Tax Justice Network thinks the exemption shouldn’t be granted, because basic data about a company’s aggregated revenue “does not enter into areas of commercial sensitivity”.
“There is zero evidence to suggest that any multinational is commercially dependent on hiding the location of its economic activity from the public, or its competitors,” it has written.
“There is, however, abundant evidence of multinationals having hidden cross-border tax abuse schemes in such a way to generate an unfair advantage over others.”
In 2022 the ATO tax transparency report showed that almost one-third of large corporations paid no income tax in Australia in 2020-21. But there are legitimate reasons not to pay tax, and Guardian Australia isn’t suggesting wrongdoing by any particular company.
The crossbench is being lobbied hard. The independent senator Tammy Tyrrell is concerned. She told Guardian Australia that “Labor’s reporting scheme could deter businesses from setting up shop here”.
“Why would a multinational company go to Tasmania when it means they have to disclose how much tax they pay in Tuvalu? They could just go set up in New Zealand, export to Tassie and not worry about it.”
Tyrrell claims the regime is “out of step with what the rest of the world is doing” and would amount to one of “the most aggressive reporting requirements in the world”.
Her former party mate Jacqui Lambie is having none of it though, warning: “I won’t be supporting any mechanism that allows multinationals to police themselves.
“Multinationals have whole teams of people dedicated to avoiding tax and the Liberals really think they can be trusted to self-regulate? I mean, seriously, you couldn’t make this shit up.”
Senators David Pocock and Lidia Thorpe are also broadly supportive of country-by-country reporting.
The Greens Treasury spokesperson, Nick McKim, sees room for further improvement.
“We want multinationals to separately report their activities in well-known tax havens like Puerto Rico, Luxembourg and the Netherlands, and to report separately against the jurisdiction where they are headquartered,” he says.
“We also think that the tax commissioner should notify the finance minister and public when a company has failed to comply with its reporting obligations.”
The Coalition wants to water down the bill; the Greens want to toughen it.
There isn’t much time left in this parliament. It may be one of those rare instances in which the Coalition or Greens will have to decide it isn’t worth insisting they have it all their own way.
Otherwise Australia’s world-leading tax transparency scheme may end world-following, just as some companies would prefer it.
Paul Karp is Guardian Australia’s chief political correspondent
