Tax Justice Network hails world-leading Australian legislation on corporate tax transparency

PUBLIC COUNTRY BY COUNTRY REPORTING REQUIREMENT WILL REVEAL PROFIT SHIFTING PATTERNS AND CURB TAX ABUSE 

In the final session before elections, the Australian Senate has voted to pass world-leading legislation on corporate tax transparency.[1] The measure, which is projected to yield billions in additional revenues by curbing the profit shifting of multinational companies, follows the long-running campaigning of Tax Justice Network-Australia, along with CICTAR (Centre for International Corporate Tax Accountability & Research) and a coalition of national and global civil society and union member organisations and investors.

Alex Cobham, chief executive at the Tax Justice Network, said:

“We celebrate this important legislation, and the years of campaigning work that has made it possible. The corporate tax transparency delivered today will contribute to curb multinationals’ tax abuse, not only in Australia but around the world – with billions of dollars at stake. Bit by bit, we are achieving the goal of public country by country reporting, to put multinationals on a level playing field with smaller, domestic businesses. Australia’s legislation is world-leading, and sets a new bar for others to follow. 

“Global momentum is with tax justice. This great victory comes hot on the heels of yesterday’s UN General Assembly vote to start negotiations on an international tax convention. That convention will be a vehicle for comprehensive reforms, and one of the first priorities should be to establish a global requirement for public country by country reporting by multinationals.”  

Jason Ward, from CICTAR, said:

“Australia’s public country-by-country reporting legislation leaps in front of much weaker efforts in the EU. Other jurisdictions will follow Australia’s move to require far greater transparency from the world’s largest multinationals. Corporate giants, with ever growing profits, have stolen funding from public health, education and a sustainable future for far too long.”

Dr Mark Zirnsak, spokesperson for the Tax Justice Network Australia, said:

“The new law will help deter the tax dodging games that multinational corporations and their tax advisers have been able to play for too long, to the detriment of ordinary people who pay their taxes as required to fund the government services we all need and rely on.”

The legislation passed today requires all major multinationals operating in Australia to publish country by country reporting data on the scale of their activities, including profits declared and tax paid, in a list of jurisdictions deemed as high risk. Where public country by country reporting is already in place for certain industries, academic research has shown an increase in effective tax rates paid by multinationals. The Tax Justice Network has estimated that this would yield US$89 billion in additional revenues each year, worldwide.[2]

The legislation is therefore of global importance – both because of the greater transparency it will provide directly, and because of the momentum it will add to efforts to obtain that truly global coverage of country by country reporting, potentially through the negotiation of the UN framework convention on international tax cooperation which will begin in early 2025.[3]

While the Australian measure does not require reporting for all countries of operation, it will provide substantially more data than the equivalent European Union measure which is now in force. This is for two reasons. First, the EU measure only requires reporting for EU member states and jurisdictions on the bloc’s ‘non-cooperative’ list – which is populated with a handful of small jurisdictions whose role in international profit shifting is trivial at most.[4] The Australian legislation allows the finance minister to identify jurisdictions that pose a significant threat, and the preliminary list already includes a range of jurisdictions that are highly ranked on the Corporate Tax Haven Index, including Singapore (ranks 5th) and Hong Kong (ranks 6th).[5]

Second, the EU measure only requires reporting under the flawed OECD standard. The Australian measure requires alignment with the Global Reporting Initiative (GRI) standard. Co-designed by investors, reporting companies, labour representatives and civil society experts, the GRI standard is widely regarded as globally leading. The OECD has so far resisted calls to adopt the GRI standard, including from investors with trillions of dollars of assets under management.[6]

The Australian legislation has been the subject of heavy lobbying, including from the OECD itself seeking to prevent progress.[7] The government remained committed however, but the bill then faced the risk of running out of time in the legislative calendar as elections approach. Following a letter to Prime Minister Albanese signed by global civil society organisations and leading individuals,[8] however, and a last-minute deal between the Australian government and the Green Party, the legislation was passed in the final Senate sitting.

-ENDs-

Notes to editor

1. The legislation is the Treasury Laws Amendment (Responsible Buy Now Pay Later and Other Measures) Bill 2024, available here. The specific element, ‘Schedule 4: Country by country reporting’, is detailed here.
2. The State of Tax Justice 2022 provides analysis on the effectiveness of country by country reporting, and reveals that requiring multinational corporations that are already disclosing country by country reporting privately to disclose this reporting publicly can prevent $89 billion in cross-border corporate tax abuse a year – equivalent to preventing 1 of every 4 tax dollars lost to multinational corporations using tax havens to underpay tax. The report is published online here.
3. See our press release, ‘United Nations General Assembly votes overwhelmingly to begin historic, global tax overhaul’, 27 November 2024, available here.
4. The EU list of non-cooperative jurisdictions for tax purposes, available here, currently includes American Samoa, Anguilla, Fiji, Guam, Palau, Panama, Russia, Samoa, Trinidad and Tobago, US Virgin Islands and Vanuatu. A critical assessment of the list and the politicisation of its criteria can be found here.
5. The Corporate Tax Haven Index can be accessed here. Singapore and Hong Kong pose significant risks not only for Australia but globally, ranking 5th and 6th respectively.
6. The OECD’s public consultation on its country by country reporting standard in 2020 received an overwhelming and clear response. Summary analysis of the responses of investors, activists and independent experts can be found here. Sadly, we are unable to provide a link to any subsequent response from the OECD.
7. Despite repeated denials from the OECD, the Financial Times reported that the organisation that in theory should support stronger tax transparency had indeed lobbied the Australian government not to go ahead. More details here.
8. The letter to Prime Minister Albanese, from more than 50 global and Australian civil society groups, investor groups and leading individuals, was published by Bloomberg News, here.