Taking on tax avoidance: a plan to end tax avoidance in the extractive resources sector

Business enterprises Business ethics Company tax Governance Tax evasion Mineral industries Australia

This report tables a 10 point plan for strengthening Australia’s anti-tax avoidance regime.

Tax avoidance by major multinationals is costing Australians billions of dollars every year. But while large multinationals may have become increasingly savvy at minimizing their tax burden within Australia through complicated processes, there are real steps that can be taken to make it more challenging for them to do so.

The report first argues in favour of adopting public Country-by-Country Reporting, which would require multinationals to disclose all subsidiaries and the jurisdictions they operate in, as well as information about the taxes they have paid – a policy that has been discussed but, so far, not implemented anywhere in the world.

Focusing further on transparency initiatives, this report outlines how a mandatory disclosure policy is needed to bring Australian into line with other countries. A mandatory disclosure for extractive companies would see extractive companies required to publish their payments to all levels of government. Additionally, the introduction of an Extractive Industries Transparency Initiatives would further boost transparency in the sector, and bring Australia up to speed with other countries in the region, such as Indonesia, Papua New Guinea, and the Philippines.

This report then recommends further reform to Australia’s transfer pricing regulations and to eliminate reduced disclosure requirements and special purpose options for annual financial statements filed with ASIC. Major extractive companies use ‘reduced disclosure requirements’, or ‘special purpose’ options which have incomplete information and should be eliminated.

A mandatory tax transparency code is then explored. The Treasury should be tasked with analysing global best practice and develop a model framework for Australia. The Petroleum Resources Rent Tax (PRRT), also requires further reforms, as it still generates minimal revenue. While the incumbent government, two years after initiating a review, has recently introduced some minor reforms to the PRRT, more work is needed to ensure the framework begins delivering more revenue. The major issue of the pricing the gas for PRRT has been kicked further down the road for a future government to decide. Even after recent reforms, major new offshore LNG projects are still unlikely to ever pay any PRRT.

The report concludes by offering further transparency and justice initiatives, such as ensuring executives are held to account for any misleading statements to parliament, and that the Australian Taxation Office (ATO) be granted the authority to disclose major tax disputes with multinationals. Currently, the strict rules around ATO disclosure means that it is effectively prohibited from making costly corporate tax disputes public. This leaves the public in the dark about major cases of tax avoidance with significant revenue implications.

Tax avoidance by multinationals is a major issue in Australia. It undermines Australia’s tax system, places increased responsiblities on individual tax payers and small businesses, and has for too long been treated with too high a degree of tolerance. As this report demonstrates, there are practical ways in which the Australian government can tackle tax avoidance, and ensure all businesses in Australia – big and small – are operating on an even playing field.


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