Coalition Members' Dissenting Report

Tax Laws Amendment (2013 Measures No. 2) Bill 2013 – Schedule 5 (Tax secrecy and transparency)

1.1        Coalition members of the committee consider that the amendments proposed in Schedule 5 of the Tax Laws Amendment (2013 Measures No. 2) Bill 2013 should not be proceeded with. This schedule should be excised from the bill.

1.2        Any proposal to not only allow, but to require the Commissioner of Taxation to publicly release the up-until-now confidential tax affairs of certain taxpayers should be pursued with far more care and consideration than has occurred here.

1.3        The Coalition supports greater transparency in the reporting of government information, including tax information.

1.4        The Coalition supports the publication of aggregate tax information (unless that information could be reasonably attributed to an individual).

1.5        However, many of these amendments constitute an overreaction by a Labor government, desperately trying to quickly wrest back the moral or transparency ‘high-ground’ in relation to the reporting of the tax affairs of taxpayers. 

1.6        This knee-jerk response arose from the government being caught out in February this year trying to hide the lack of meaningful revenue from the minerals resource rent tax (MRRT) in the first half of its first year (2012–13) compared to that forecast.

1.7        Once it became clear in early February that the ATO (Commissioner of Taxation) was going to reveal the embarrassing level of MRRT collections to a Senate Committee (because contrary to the Treasurer's assertions there was nothing in the tax laws preventing their release), the government panicked. It not only pre-empted the imminent public release of MRRT revenue collections by the Tax Commissioner, but it went further and over the top in a typically hasty and ill-considered manner by announcing the breaking of a long-held practice in this country of keeping the tax affairs of individual entities confidential.

1.8        Moreover, such a precedent should not be set so lightly or flippantly, as the government is attempting to do here. This new approach could easily be used to pursue or target other taxpayers through the disclosure of their tax affairs in ways that have yet to be contemplated.

1.9       

1.10      A fuller and more extended consultation process should have occurred and would have been able to identify any unintended consequences and, where necessary, devise safe guards or limits to protect other taxpayers from future governments that may turn out to be as anti-business and vindictive as this one.

1.11      No responsible Opposition could possibly support such a breaking of tradition (requiring the Commissioner to break taxpayer confidentiality) after so little consideration.

1.12      Coalition members have a number of other more specific concerns which are outlined in the following paragraphs.

OECD project – BEPS

1.13      Certain amendments proposed in Schedule 5 of this Bill require the Commissioner of Taxation to release information to the public from a corporate entity’s tax return, namely: a gross figure, the entity’s total income; a net concept, its taxable income; and the income tax payable.

1.14      The Government points to the OECD's project 'Base Erosion and Profit Shifting (BEPS)' as a justification for these requirements.

1.15      Australia must be a constructive contributor to the OECD's project.

1.16      Australia's contribution, however, should be measured and considered.

1.17      The paper that the OECD released in February this year did not recommend public disclosure of data from taxpayer returns.

1.18      If this schedule is enacted, Australia will be the only country apart from Denmark, in either the G20 or the OECD, to publish confidential commercial and taxation information.

1.19      Like with so many other policies and initiatives of this government, we are thrust out ahead of the rest of the world as if we were global guinea pigs.

1.20      We should be mindful that BEPS addresses not only tax compliance but what is a more fundamental policy issue.

Domestic rules for international taxation and internationally agreed standards are still grounded in an economic environment characterised by a lower degree of economic integration across borders, rather than today’s environment of global taxpayers, characterised by the increasing importance of intellectual property as a value-driver and by constant developments of information and communication technologies.[1]

1.21      There is a need for a global response to this complex global issue, which suggests taking careful, measured steps to assist policy makers develop approaches that will address the issue.

1.22      Coalition members of the Committee remain unconvinced that public release of what hitherto has been confidential information, the unauthorised disclosure of which is subject to legal sanction, will assist in developing such a policy response.

Risks that the information disclosed on tax affairs will be misleading

1.23      The Government through the Assistant Treasurer has said that "by increasing the transparency of our business tax system, the government will ensure that the public is well informed about the contributions made by large corporations."

1.24      In the debate in the House, the Shadow Treasurer illustrated that this is a facile argument.

1.25      The information the Commissioner will be required to disclose will more often than not be misleading.

1.26      Many adjustments are made to the total income figure to arrive at the net amount of taxable income, and ultimately the tax payable.

1.27      The adjustments are allowed under the law and will reflect formal tax policy decisions.

1.28      And of course the ATO can challenge the relevant claims and challenge those that are considered not allowable.

1.29      The company would likely have to go to some length, at their cost, to explain how the amount of tax payable is arrived at, when starting from the amount of total income in their tax return.

1.30      Without the context to assist in understanding how the tax payable figure is derived, the numbers presented in the Commissioner's report will frequently mislead.

This could lead to inappropriate responses

1.31      There is as well the associated risk that misleading information could lead to inappropriate responses.

1.32      Naming and shaming taxpayers is another motive behind this bill.

1.33       The Assistant Treasurer has said that increased transparency is intended to discourage aggressive tax minimisation by large and multinational businesses.

1.34      The Corporate Tax Association of Australia Inc. has pointed out the risks and possible consequences that the Bill presents:

In some cases this lack of contextual information could lead to companies having their reputations unfairly tarnished.

Unfortunately, there are recent international examples where social justice groups have unfairly targeted large companies on the basis of their alleged poor tax performance when the facts do not support their position.[2]

Only applies to companies – why not other structures?

1.35      At this juncture let us note that the measure applies only to companies and only if their total income is $100m or more.

1.36      There is no application, however, to hedge funds, venture capital funds or private equity that are structured as a trust or a partnership.

1.37      Is this a fair and just law, one that does not discriminate against a class of taxpayer?

Multinationals can reduce their apparent (even real) foot-print here

1.38      It is highly unlikely that the bill will have any impact on foreign multinational groups such as Google and Amazon, which may have minimal Australian sourced income associated with an Australian corporate entity (especially after any significant offshoring of profits has taken place).

1.39      Indeed the Australian Financial Markets Association have observed:

Of greater concern is that the disclosure framework could incentivise taxpayers to adopt structures that reduce total income to below $100 million so as to escape the disclosure requirement.[3]

1.40      Attracting foreign investment to Australia is a matter that we must never lose sight of.

1.41      Appropriately, Australia has taken action in recent years in relation to sharing tax information by signing over 30 Tax Information Exchange Agreements with low tax jurisdictions.

Concluding Remarks

1.42      Quite simply, the Government has not demonstrated that Australia needs to reverse the long held principle that public release of taxpayer-specific information should be confidential is justified.

1.43      The Government talks about transparency allowing for an informed debate.

1.44      We support policy being developed on the basis of evidence.

1.45      But the information that would be disclosed by reason of this bill would not inform the public or aid policy development.

1.46      Rather, in all likelihood, it would mislead.

1.47      Confidentiality of taxpayer information is fundamental to the administration of taxation law.

1.48      Confidentiality is protected because ensuring the privacy of sensitive information, including commercial information, goes to public confidence in the administration of taxation law.

1.49      The Government must demonstrate convincingly why this Parliament should abrogate an important right and a foundation principle of our taxation law.

1.50      The amendments proposed in Schedule 5 to this bill do not do that.

1.51      As such, Coalition members of the Committee make the following recommendation:

Recommendation 1

1.52             That the Senate oppose Schedule 5 of this Bill and require a more substantial Senate inquiry into issues around public release of specific confidential taxpayer information.

 

Senator David Bushby                                                       Senator Alan Eggleston
Deputy Chair

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