Posted 29/03/2019 by Andrew Maslaris
In the lead up to the next federal budget and election campaigns, issues of tax are likely to again come to the fore of public debate. An important element of the debate relates to the more than $95bn in expected taxes coming from company and resource rent taxes.
The information contained in the Australian Taxation Office’s (ATO) publication of the Corporate Tax Transparency Report provides some insight into the amount of tax paid by the largest companies operating in Australia. However, caution should be exercised in relying solely on the report to form a view about a company’s tax compliance as the report provides insufficient information to explain a company’s final tax bill.
On 13 December 2018, the ATO released the fourth Corporate Tax Transparency Report (CTTR). This flagpost explains what the CTTR is and outlines why its limitations mean it should be used cautiously in drawing conclusions about whether particular companies are avoiding tax.
What is the CTTR?
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 discloses:
-
total income
-
taxable income and
-
tax payable.
The CTTR also discloses which entities have paid Petroleum Resource Rent Tax (PRRT) and the amount paid.
The CTTR is complemented by the ATO’s Voluntary Tax Transparency Code (the Code), which provides a framework for taxpayers to voluntarily provide further information explaining their tax affairs. The Code allows businesses to provide more detailed information about their tax affairs. For example, in 2017 BHP disclosed a $1.016 billion tax dispute with the ATO for the 2003–2013 income years relating to their Singapore marketing business. The Code also provides a business with the opportunity to explain why it may have paid a low amount of tax or paid no tax. For example, the ABC reported that Qantas did not paid tax for 10 years—Qantas’ 2017 Tax Transparency Code Report explained that the reason no tax was paid in 2016 and 2017 was due to the utilisation of carried forward tax losses of $1.376 billion in 2016 and $523 million in 2017 (and that as at 2017 Qantas has carried forward tax losses of $951 million).
CTTR Background
The CTTR was legislated by the Gillard Government on 29 June 2013. In November 2015, the Abbott Government amended the CTTR to increase the reporting threshold for privately owned companies from $100 million income to $200 million income. The Parliamentary Library Bills Digest discusses this in more detail.
Limitations and criticisms of the CTTR
The CTTR is sometimes cited in support of arguments that a particular company is a tax avoider or pays too little tax for the amount of revenue it earns. There are, however, a number of limitations with the data contained in the CTTR that ultimately limit its usefulness as a public transparency tool.
Limited information
The CTTR contains limited information. It does not detail operating profits, tax losses or tax offsets—the inclusion of which would provide a clearer picture of a company’s tax position. For example, where an entity has taxable income of $0 it may be due to operating losses, unutilised tax losses from previous years or some other reason. The inclusion in the CTTR of operating profit and tax loss information would shed more light on a company’s tax position and provide commentators with the opportunity 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 (approximately 160 out of 2,100 business are listed as having signed the Corporate Tax Transparency Code and Register). In fact, a number of large US tech-firms have rejected the Code, 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 the ATO subsequently amends a tax return, in later years the information for a previously published year may not represent the actual amount of tax paid. For example, the press reported that the ATO recouped $3 billion from Microsoft, Rio, BHP, Apple and Google in 2017. As the CTTR is published at a point in time, the previously published CTTR’s for these companies will not be amended to reflect the actual amount of tax paid for that year.
Although publishing such information would increase public transparency of company tax information, this should be balanced against the risk of disclosing information about ATO settlements and settlement amounts.
A further issue with the CTTR is that it may be difficult to identify a business which comprises several taxable entities, or where its tax information is not disclosed under their trading or business name.
Reporting thresholds
The decision to limit the reporting obligation to private entities with at least $200 million in Australian income remains controversial, with the ALP pledging to restore the threshold to $100 million.
Overview: CTTR data 2013-2017
|
CTTR Report
|
No. of reporting entities
|
Total income reported
|
Total tax paid
|
No. of $0 tax entities
|
PRRT collected
|
|
2013-14
|
1,859
|
$1.77 trillion
|
$41.9 billion
|
675
|
$1.77 billion
|
|
2014-15
|
1,945
|
$1.80 trillion
|
$42.01 billion
|
704
|
$1.20 billion
|
|
2015-16
|
2,109
|
$1.84 trillion
|
$38.59 billion
|
770
|
$845.5 million
|
|
2016-17
|
2,150
|
$1.87 trillion
|
$45.79 billion
|
751
|
$945.9 million
|
Numbers rounded
Top 10 taxpayers 2013-2017
The tables below have been compiled using data from previous CTTR reports.
|
2013-14
|
|
Entity
|
Tax Paid
|
Previous year
|
|
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
|
|
|
|
2014-15
|
|
Entity
|
Tax Paid
|
Previous year
|
|
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
|
|
|
|
2015-16
|
|
Entity
|
Tax Paid
|
Previous year
|
|
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 Billiton
|
$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
|
|
|
|
2016-17
|
|
Entity
|
Tax Paid
|
Previous year
|
|
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
|
$1,031,795,895
|
12
|
|
10. AMP
|
$821,170,941
|
9
|
Source: Report of Entity Tax Information, data.gov.au
PRRT 2013-2017
|
Entity
|
2013-14
|
2014-15
|
2015-16
|
2016-17
|
|
AWE (OFFSHORE PB) (A.C.N. 008 939 080 PTY LTD)
|
$5,315,502
|
$1,290,297
|
-
|
$359,449
|
|
AWE OIL (WESTERN AUSTRALIA) (A.C.N. 008 939 080 PTY LTD)
|
$5,358,875
|
-
|
-
|
$394,169
|
|
BHP BILLITON (AUSTRALIA)
|
$381,369,378
|
$340,737,757
|
$185,718,418
|
$210,117,987
|
|
BHP BILLITON (BASS STRAIT)
|
$559,866,686
|
$293,921,172
|
$278,969,430
|
$334,627,044
|
|
BHP BILLITON (VICTORIA)
|
$26,555,124
|
$28,110,468
|
$23,294,181
|
$30,746,297
|
|
COOPER ENERGY (CH)
|
-
|
-
|
-
|
$11,341,443
|
|
COOPER ENERGY (MF)
|
-
|
-
|
-
|
$1,936,501
|
|
ESSO AUSTRALIA
|
$538,485,033
|
$265,070,131
|
$237,583,829
|
$323,627,732
|
|
JX NIPPON OIL & GAS EXPLORATION
|
-
|
-
|
-
|
$3,893,918
|
|
MITSUI E&P
|
$63,010,702
|
$82,422,986
|
$52,622,225
|
$5,771,572
|
|
PEEDAMULLAH PETROLEUM
|
$5,508,558
|
$211,763
|
$2,243,696
|
$2,347,670
|
|
QUADRANT PVG
|
-
|
$114,654,288
|
$35,505,048
|
$9,431,884
|
|
ROC OIL (WA)
|
$10,493,858
|
$3,727,953
|
$311,812
|
-
|
|
TALISMAN OIL & GAS
|
$9,099,656
|
$3,471,458
|
-
|
-
|
|
TRIANGLE ENERGY
|
-
|
-
|
-
|
$735,133
|
|
VERMILION OIL & GAS
|
$75,117,597
|
$36,801,589
|
-
|
$10,588,522
|
|
WOODSIDE ENERGY
|
$85,795,767
|
$31,087,035
|
$29,236,256
|
-
|
Source: Report of Entity Tax Information, data.gov.au