Disclosure of tax havens to shareholders
Firms undertaking business in tax havens will have to disclose this fact to shareholders and make significant tenderers disclose their country of tax domicile under this proposal.
According to the Labor Party, tax havens hold an estimated $7.5 trillion of the world’s financial wealth, costing the global economy $200 billion in lost taxes every year. Whether shareholders will react positively or negatively to this new information may vary.
New Tax Transparency Code
The Labor Party wants to mandate adoption of the Voluntary Tax Transparency Code (VTTC) for all medium and large corporations operating in Australia, including subsidiaries of multinational corporations. The VTTC is a set of principles and minimum standards to guide medium and large businesses on public disclosure of tax information. The VTTC was developed by the Board of Taxation and endorsed by the Coalition Government in the 2016–17 Federal Budget.
We agree with Labor that tax transparency measures can be a powerful tool in promoting compliant behaviour. However, the general public can be misled by misrepresentations of the information. If companies are forced to comply with the VTTC, they will be wise to make sure that it is incapable of misinterpretation.
ATO annual reporting of company data
The Labor Party proposes to reduce the threshold for tax transparency reporting for private companies from $200 million to $100 million; a measure estimated to affect approximately 600 large private companies with turnover of between $100-200 million, currently excluded from this measure. Labor will also consider adding additional data points, such as carried forward losses and other right-of-reply type data; and a link to a company statement/explanation of tax practices or tax transparency report
Currently, the ATO is required to annually publish tax-paid data for many companies. This reporting is currently limited to total income, taxable income, and tax payable.
Again, information such as this can be misrepresented. Companies who manage their public disclosures well are less likely to suffer such misrepresentations.