The Australian Tax Office (ATO) has just released its 7th annual report on corporate tax transparency for the 2019-20 income year. The report indicates that voluntary tax compliance by the corporate segment has improved.
According to ATO Deputy Commissioner, Rebecca Saint, corporates are placing a higher value on becoming tax compliant and were driving consistent and willing voluntary participation. She noted that the report reflected the intense level of engagement that the ATO had entered with top taxpayers in recent years.
The report’s assessment was based on an evaluation of 2,370 corporate entities. Of these, 1,378 are foreign-owned with an income of $100 million or more. A further 513 are Australian public entities, also with an income of $100 million or more. The remaining 479 are Australian-owned resident private companies with an income of $200 million or more.
The companies reflected in the report accounted for about 65% of all corporate tax income collected in the 2019-20 income year. They had cumulatively paid a tax bill of $57.2 billion.
Under the recently launched tax compliance program, the percentage of large corporations that achieved a “high assurance” rating has grown from 6% in 2019, to about 49% this year. Saint further confirmed that four out of five of the largest businesses had attained either a high or medium assurance rating, demonstrating that the health of the tax system was dependent on willing participation.
The ATO also attributed the improvement in tax compliance to the efforts of the Tax Avoidance Taskforce. It has been recognised for having collected more than $7.2 billion in additional taxes from public and multinational entities.
The justified trust program run by the task force was highlighted for prompting large businesses to demonstrate that they were paying the correct tax amounts with objective evidence. The program has targeted the Top 100 public and multinational businesses under this program. Saint said that the boosted assurance ratings were thanks to businesses recognising that investing in tax governance had tangible real-world benefits. Those in the Top 100 that achieved a low assurance rating will likely undergo comprehensive reviews and audits.
The report found that there was some negative impact felt during the starting period of the Covid-19 pandemic as indicated by the drop in taxable incomes from the wholesale, retail, and services sectors. The mining sector was however found to be holding strong and contributed around 44% of the taxable payable in 2019-20. Total income, taxable income and income tax payable have increased from the first report made in the 2013-14 income year.
Saint has also raised concern about companies that have been mispricing loans and undertaking cross-border dealings with related parties that have resulted in large amounts being shifted to offshore low tax jurisdictions and therefore not subject to taxation in the country.
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