ATO disclosure of tax information
Banking on Tax, Issue 10
A significant issue for major banks and financial institutions in Australia is the new regime that will result in the publication of the annual tax and income amounts of large corporations. On 29 June 2013, Tax Laws Amendment (2013 Measures No. 2) Act 2013 (‘the Act’) received Royal Assent. The Act requires the Commissioner to make public specific information relating to the tax affairs of all corporate tax entities that have a reported total income of $100 million or more.
The information to be made publically available includes the taxpayer’s name, ABN, total income, taxable income and tax payable. The total income is based on gross (accounting) income currently reported at item 6(S) in the company tax return, not amounts in the financial statements. For entities with a tax loss, the Commissioner will not publish the quantum of the loss.
The release of this information is likely to raise questions from media, academia, social commentators and politicians if the reported levels seem low compared to reported company profits. Based on recent experience in the UK, U.S. and here in Australia, the debate can be heated and emotional, particularly when based on a lack of context or understanding as to how the amounts tie together. Australian banks will need to be prepared to respond to the debate or risk reputational damage and are well advised to develop a clear communication strategy before the new regime commences in 2014.
Similar disclosure rules are also being introduced in other jurisdictions, with the European Commissioner for the Internal Market and Services recently announcing that profit and tax reporting rules for banks would be extended to large companies and groups. In addition, the OECD, G8 and G20 have all indicated their support for further tax disclosure rules, meaning that the debate and commentary can easily develop momentum regionally and globally.