RESEARCH PAPER SERIES, 2019–20   5 MAY 2020

Report of entity tax information: a quick guide

Andrew Maslaris and Natalie Dajkovich

Economic Policy Section

This quick guide is an update of the Parliamentary Library’s 2019 FlagPost on the same subject (Corporate Tax Transparency Report), with some additional content and information.

On 12 December 2019, the Australian Taxation Office (ATO) released the fifth Corporate Tax Transparency Report (also referred to as the 2017–18 Report of Entity Tax Information). This paper explains what the Report is and outlines why it should be used cautiously in drawing conclusions about whether particular businesses are avoiding tax. It also contains information about the Voluntary Tax Transparency Code and illustrates how that information can be used to supplement the Corporate Tax Transparency Report.

What is the Report of Entity Tax Information?

The Corporate Tax Transparency Report (CTTR) discloses total income, taxable income and tax payable for public and foreign owned corporate tax entities with Australian income exceeding $100 million and Australian private companies with income exceeding $200 million. The CTTR also discloses which entities have paid Petroleum Resource Rent Tax (PRRT) and the amount of PRRT they have paid.

Voluntary Tax Transparency Code

The CTTR is complemented by the ATO’s Voluntary Tax Transparency Code (the Code) which provides a framework for businesses to voluntarily provide further information explaining their tax affairs, including why they may appear to be paying a low amount of tax relative to their total earnings and details of disputes with the ATO. For example:

• Qantas’ 2017 Voluntary Tax Transparency Code Report and 2018 Voluntary Tax Transparency Code Report explained that Qantas used carried forward tax losses from previous years to reduce its tax payable

• Google’s 2017–18 Tax Transparency Code Report provided a detailed breakdown explaining why its effective tax rate was 17 per cent for 2018 and 16 per cent for 2017, as well as disclosing that Google was expecting a higher corporate tax bill in 2018 due to a ‘combination of adjustments for prior years and prepayments for the current year, as per notices issued by the ATO’

• BHP’s Economic Contribution Report 2017 disclosed a $1.01 billion tax dispute with the ATO for the 2003–2013 income years relating to its Singapore marketing business

• Coca-Cola Amatil’s (CCA) 2018 Tax Transparency Report explained that the reason CCA’s effective tax rate for 2017 was 19.3 per cent (compared to 28.9 per cent in 2018) was due to ‘the recognition of previously unrecognised capital losses to offset a capital gain arising from the Richlands property sale and a dividend from an offshore subsidiary which is exempt from Australian tax. (The underlying profits from which this dividend has been paid have been subject to corporate income tax in New Zealand at the rate of 28%)’

• ExxonMobil’s Tax Facts disclosed that the ATO issued ‘amended income tax assessments to ExxonMobil Australia Pty Ltd for the 2010 and 2011 income years, which may also have implications for the 2012 to 2017 income years. While we paid an amount of $42 million to the ATO in 2018 relating to the 2010 and 2011 income years, we stand by the pricing of our loans and resolution of the amended returns may require negotiations extending over a number of years’

• a number of businesses, including ANZ, CBA, Qantas, disclosed they have entered into an Annual Compliance Agreement (ACA) with the ATO. As explained by the Australian Treasury, ‘ACAs are voluntary administrative arrangements which set out a framework for managing the compliance relationship between the ATO and a taxpayer. Taxpayers will generally approach the ATO to enter into an ACA. The ATO will decide on a case-by-case basis whether an ACA is suitable. A taxpayer with an ACA may still be subject to compliance action in relation to matters outside the scope of the ACA’. The ATO’s webpage on Annual Compliance Agreements has additional information about ACAs.

As at 30 April 2020 there are 170 signatories to the Code and 367 reports have been published since 2014.

CTTR Background

The CTTR was enacted by the Gillard Government in June 2013, with Assistant Treasurer David Bradbury stating:

Improving the transparency of Australia’s business tax system will encourage enterprises to pay their fair share of tax and discourage aggressive tax minimisation practices. It will allow the public to better understand the business tax system and engage in debates about tax policy.

Reflecting the Coalition’s long-standing opposition to the disclosure of tax information of private individuals, the Turnbull Government amended the CTTR in November 2015 to remove privately owned companies from having their information publically disclosed. According to the Explanatory Memorandum this would ensure that the disclosure of information under the CTTR:

does not affect the privacy and personal security of the ultimate owners of Australian-owned private companies. It also removes the risk that the release of the information will harm Australian-owned private companies’ market environment.

However, in December 2015, privately owned entities were again included in the CTTR, but at a threshold of $200 million income (compared to the original $100 million threshold when first enacted in 2013) as the result of an amendment moved by the Greens in relation to the Tax Laws Amendment (Combating Multinational Tax Avoidance) Bill 2015.¹

The decision to limit the reporting obligation to private entities with at least $200 million Australian income remains controversial with the ALP pledging to restore the $100 million threshold in May 2017.

Limitations and criticisms of the CTTR

There are a number of limitations with the data contained in the CTTR that ultimately reduces its usefulness in analysing a business’s tax performance.

Limited information

The CTTR does not detail operating profits, tax losses or tax offsets, the inclusion of which would provide a clearer picture of an entity’s tax position and allow commentators to draw conclusions based on more meaningful information, and enhance the public debate around multinational tax avoidance.

Although the Voluntary Tax Code provides a framework for businesses to provide this additional information, the voluntary nature of the Code means that only a small percentage of businesses subject to the CTTR have chosen to do so, and the majority of businesses who have signed the code are Australian (as at 30 April 2020, there are 170 signatories and 367 publications—285 of these publications were by Australian businesses, 67 foreign businesses and 15 dual listed businesses).

Although Google signed the Code in 2018, a number of other large US tech-firms have rejected it, with IBM commenting that they would not sign the Code because of concerns about competitors knowing too much about its operations and a stated desire to protect the company's clients.

Source of information and amended assessments

The CTTR is based on information contained in an entity’s tax return in the year it is lodged. This means that where an entity’s tax return is amended in later years, the information for a previously published year may not represent the actual amount of tax owing for that year. Therefore, as the CTTR is published at a point in time, the previously published CTTR will not be amended to reflect the ‘correct’ amount of tax owing for that year where there has been a settlement or litigation. For example, previous years CTTR’s do not reflect the following additional payments of tax:

• BHP’s $500 million tax settlement with the ATO relating to the 2003 to 2018 income years

• the reported $866 million partial settlement paid by Chevron, following their failed appeal to the Federal Court in relation to a disputed $340 million tax bill in respect of a similar tax arrangement

• Google’s payment of $481.5 million in additional taxes paid in 2019 in settlement of a dispute with the ATO in relation to previously lodged tax returns.

As such, where this occurs, the CTTR can be misleading as to how much tax was actually paid for a given year.

Identifying businesses

It may be difficult to identify a business where it comprises several taxable entities, or where its tax information is not disclosed under their trading or business name. For example:

• BHP has multiple entities listed in the CTTR (including BHP Billiton Ltd, BHP Iron Ore (Jimblebar) Pty Ltd, BHP Billiton Mitsui Coal Pty Ltd and BHP Billiton (Aus) DDS Pty Ltd)

• Fonterra is listed under its parent entity, New Zealand Milk (Australasia) Pty Ltd and Saputo is listed under its Australian Company Number in the 2017-18 CTTR

• Glencore Holdings was listed as GHP 104 160 689 Pty Ltd in the 2013-14 and 2014-15 CTTRs

• a number of entities are listed under their Australian Company Number rather than business name (for example, the 2017–18 CTTR contains five such entities with approximately $3.7 billion total income).

Snapshot of CTTR data

The tables below provide a summary of the information contained in the CTTR’s, as well as the largest ten taxpayers as disclosed by the CTTR.

Table 1: Overview of CTTR data 2013–2017

CTTR Report

No. of reporting entities

Total income reported

Total taxable income reported

Total tax paid

No. of $0 tax entities

PRRT collected

2013-14

1,859

$1,774 billion

$178.09 billion

$41.92 billion

676

$1.77 billion

2014-15

1,945

$1,797 billion

$169.47 billion

$42.01 billion

704

$1.20 billion

2015-16

2,109

$1,839 billion

$173.51 billion

$38.59 billion

770

$0.85 billion

2016-17

2,159

$1,869 billion

$190.61 billion

$45.79 billion

751

$0.95 billion

2017-18

2,246

$2,010 billion

$219.32 billion

$52.38 billion

727

$1.16 billion

Source: Report of Entity Tax Information, data.gov.au.

Numbers rounded

Note: this table includes information relating to previous years that were included in the CTTR report for a later year (that is, they were processed after 1 September due to late lodgement or a substituted accounting period). As such, the numbers presented in this table may differ to the information provided in the ATO’s yearly summary of the CTTR data.

Top 10 taxpayers 2013–2018

The tables below have been compiled using data from published CTTR reports.

Table 2: 2013–14 CTTR

Entity

Tax paid

Previous year ranking

1. BHP Billiton

$3,950,825,604

N/A

2. Rio Tinto

$3,050,569,573

N/A

3. CBA

$2,872,351,385

N/A

4. Westpac

$2,428,665,547

N/A

5. NAB

$2,260,156,675

N/A

6. ANZ

$1,964,803,966

N/A

7. Telstra

$1,741,846,820

N/A

8. Wesfarmers

$1,093,140,349

N/A

9. Woolworths

$910,864,515

N/A

10. Fortescue Metals

$737,898,334

N/A

Source: Report of Entity Tax Information, data.gov.au.

Table 3: 2014–15 CTTR

Entity

Tax paid

Previous year ranking

1. CBA

$3,107,074,610

3

2. Westpac

$2,853,558,937

4

3. Rio Tinto

$2,733,767,906

2

4. NAB

$2,688,097,025

5

5. ANZ

$2,072,457,658

6

6. BHP Billiton

$1,718,329,663

1

7. Telstra

$1,712,473,178

7

8. Shell

$1,028,943,536

55

9. Wesfarmers

$958,824,629

8

10. Woolworths

$898,750,445

9

Source: Report of Entity Tax Information, data.gov.au.

Table 4: 2015–16 CTTR

Entity

Tax paid

Previous year ranking

1. CBA

$3,290,941,018

1

2. Westpac

$2,966,534,486

2

3. NAB

$2,428,532,833

4

4. ANZ

$1,971,453,910

5

5. Telstra

$1,738,271,313

7

6. BHP 

$1,325,839,334

6

7. Rio Tinto

$1,049,914,886

3

8. Wesfarmers

$930,590,946

9

9. AMP

$681,156,104

12

10. Woolworths

$496,872,267

10

Source: Report of Entity Tax Information, data.gov.au.

Table 5: 2016–17 CTTR

Entity

Tax paid

Previous year ranking

1. CBA

$3,937,948,031

1

2. BHP Billiton

$3,271,853,069

6

3. Westpac

$3,242,341,803

2

4. ANZ

$2,359,485,957

4

5. NAB

$2,028,419,563

3

6. Rio Tinto

$1,820,598,868

7

7. Telstra

$1,644,403,585

5

8. Wesfarmers

$1,184,714,668

8

9. Fortescue Metals

$1,031,795,895

12

10. AMP

$821,170,941

9

Source: Report of Entity Tax Information, data.gov.au

Table 6: 2017–18 CTTR

Entity

Tax paid

Previous year ranking

1. CBA

$4,311,044,402

1

2. BHP Billiton

$3,523,250,116

2

3. Westpac

$3,251,197,116

3

4. Rio Tinto

$3,170,873,230

6

5. ANZ

$2,198,812,305

4

6. NAB

$2,077,978,074

5

7. Telstra

$1,511,514,175

7

8. Wesfarmers

$1,250,026,416

8

9. Mitsubishi Development

$938,985,777

11

10. AMP

$905,083,030

10

Source: Report of Entity Tax Information, data.gov.au

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Notes

[←1]

.    Amongst other things, this Bill included the Multinational Anti-Avoidance Law, Country-by-Country Reporting and significantly increased penalties for large multinationals.