2015 Event Template - Paper
2016 QUEENSLAND TAX FORUM Session 12B: Tax Transparency is Here to Stay Written by: Ann-Maree Wolff, CTA Board of Taxation
Presented by: Ann-Maree Wolff, CTA Board of Taxation Andrew Porter AFIC
Queensland Division 18-19 August 2016 Brisbane Marriott Hotel, Brisbane
© Ann-Maree Wolff, CTA, 2016 Disclaimer: The material and opinions in this paper are those of the author and not those of The Tax Institute. The Tax Institute did not review the contents of this paper and does not have any view as to its accuracy. The material and opinions in the paper should not be used or treated as professional advice and readers should rely on their own enquiries in making any decisions concerning their own interests.
Ann-Maree Wolff, CTA
Tax Transparency is Here to Stay
CONTENTS 1
Overview ......................................................................................................................................... 3
2
Why the Code was developed....................................................................................................... 4
3
Which entities are impacted by the Code? .................................................................................. 5
4
Development Process.................................................................................................................... 6
5
4.1
Consultation .............................................................................................................................. 6
4.2
Submissions .............................................................................................................................. 6
4.3
Final Report .............................................................................................................................. 7
Early adoption mechanism ........................................................................................................... 8
© Ann-Maree Wolff, CTA, 2016
2
Ann-Maree Wolff, CTA
Tax Transparency is Here to Stay
1 Overview As part of the 2016 Budget the Australian Government announced the release of the Board of Taxation (the Board) report on a voluntary tax transparency code (the Code). The Code is a set of principles and ‘minimum standards’ to guide disclosure of tax information by businesses. The Code was developed by the Board of Taxation at the Treasurer’s request to:
encourage large and medium-sized businesses to publicly disclose their tax affairs to highlight those that are paying their fair share and to encourage all businesses not to engage in aggressive tax avoidance; and
for large businesses to take the lead, to become more transparent and help educate the public about their compliance with Australia’s tax laws.
© Ann-Maree Wolff, CTA, 2016
3
Ann-Maree Wolff, CTA
Tax Transparency is Here to Stay
2 Why the Code was developed The Code was developed in response to Government and community expectations that large businesses be more publicly transparent about their tax affairs. As such, in the 2015 Budget, the Treasurer announced that the Board of Taxation would lead the development of the Code. The Code is more advanced and more comprehensive than existing tax transparency measures from other countries and organisations. Due to the flexibility in the Code the Board has received strong support from businesses and associations. The Board believes that the Code’s voluntary nature will lead to the disclosure of greater and higher quality information. The Board wants senior management to be actively involved in the decision to adopt the Code. The aim of this is to drive cultural change within the corporate sector towards greater tax transparency. If the Code were mandatory, the Board is of the view that the exercise would be seen as a compliance and box-checking exercise delegated to lower levels within the organisation with less impact on the disclosure culture of the organisation.
© Ann-Maree Wolff, CTA, 2016
4
Ann-Maree Wolff, CTA
Tax Transparency is Here to Stay
3 Which entities are impacted by the Code? The Code disclosure is divided into two parts. A summary of the content of Part A and Part B is set out below.
Code disclosure
Who
Minimum standard of information
Part A
‘Large’ and ‘medium’ businesses
A reconciliation of accounting profit to tax expense and to income tax paid or income tax payable Identification of material temporary and non-temporary differences Accounting effective company tax rates for Australian and global operations (pursuant to AASB guidance)
Part B
‘Large’ businesses
Approach to tax strategy and governance Tax contribution summary for corporate taxes paid Information about international related party dealings
Entities with Australian turnover of $100 million or greater (‘large’ and ‘medium’ businesses) are encouraged to adopt Part A of the Code. This involves disclosing a reconciliation of accounting profit to income tax paid each year and effective tax rates for Australian and global operations. Entities with Australian turnover of $500 million or greater (‘large’ businesses) are encouraged to adopt Part B of the Code. This involves disclosure of additional information related to the company’s approach to tax strategy and governance (including details of dealings with the Australian Taxation Office), details of all Federal, State and local tax contributions and details about international related party dealings. Superannuation funds, trusts or partnerships are also encouraged to adopt the principles of the Code where possible.
© Ann-Maree Wolff, CTA, 2016
5
Ann-Maree Wolff, CTA
Tax Transparency is Here to Stay
4 Development Process On 14 July 2015 the Board was issued with terms of reference and established a working group of its members to oversee the development of the Code. The Board members of the Working Group were Michael Andrew AO (Chair of the Working Group), John Emerson AM, Ann-Maree Wolff and Neville Mitchell. The Working Group also included an Expert Panel consisting of Fiona Martin of the University of New South Wales, Victor Timos of Incitec Pivot and David Watkins of Deloitte. The Working Group also included representatives of the Treasury and the Australian Taxation Office. The Working Group was also assisted by members of the Board’s Secretariat. The Board was extremely encouraged by the level of community engagement during the development of the Code.
4.1 Consultation The Board’s consultation process involved:
Public and targeted consultation meetings with industry, tax practitioners, academics and representatives of community groups throughout August and September 2015;
Release of a Consultation Paper in December 2015 to invite and facilitate written submissions; and
Discussions with stakeholders following the release of the Consultation Paper.
4.2 Submissions The Board received 19 written submissions, including one confidential submission, in response to the Consultation Paper. These submissions were broadly supportive. The key concerns raised in the submissions were:
The need for further clarification regarding where the information in Part A and Part B can be displayed;
Further assurances that the information in a ‘taxes paid’ report is accurate;
Further guidance was requested regarding the calculation of effective tax rates;
The inconsistency of the tax policy, tax strategy and governance minimum standard with international examples;
The potential retrospectivity of the commencement date;
The interaction of the Code with other legislative requirements; and
© Ann-Maree Wolff, CTA, 2016
6
Ann-Maree Wolff, CTA
Tax Transparency is Here to Stay
The need for further clarification on which entity within a group should disclose under the Code.
4.3 Final Report The Board considered the issues raised by stakeholders in their submissions and at the consultation meetings, and the views of the Working Group, Treasury and the ATO in preparing its final report. The Board’s recommendations reflect its independent judgment. A copy of the full report can be found on the Board’s website - http://taxboard.gov.au/consultation/voluntary-tax-transparency-code/ .
© Ann-Maree Wolff, CTA, 2016
7
Ann-Maree Wolff, CTA
Tax Transparency is Here to Stay
5 Early adoption mechanism Business associations such as the Business Council of Australia, Corporate Tax Association and G100 are actively encouraging their members to comply. Many companies have been proactively considering how they can comply with the Code. The Board maintains a register of those organisations who have committed to applying the principles and the details of the Code and these are published on the Board’s website. In addition, the Board is aware of a number of companies who have internal processes currently underway to adopt the Code. In order to indicate your organisations intention to adopt the Code, you can contact the Board of Taxation on the below details. E-mail: [email protected]
Mailing Address: The Board of Taxation C/- The Treasury Langton Crescent PARKES ACT 2600
Given the high level of support for the Code, the Board considers it has achieved the appropriate balance between increased transparency and commercial sensitivity.
Ann-Maree Wolff Board of Taxation August 2016
© Ann-Maree Wolff, CTA, 2016
8
Presented by: Ann-Maree Wolff, CTA Board of Taxation Andrew Porter AFIC
Queensland Division 18-19 August 2016 Brisbane Marriott Hotel, Brisbane
© Ann-Maree Wolff, CTA, 2016 Disclaimer: The material and opinions in this paper are those of the author and not those of The Tax Institute. The Tax Institute did not review the contents of this paper and does not have any view as to its accuracy. The material and opinions in the paper should not be used or treated as professional advice and readers should rely on their own enquiries in making any decisions concerning their own interests.
Ann-Maree Wolff, CTA
Tax Transparency is Here to Stay
CONTENTS 1
Overview ......................................................................................................................................... 3
2
Why the Code was developed....................................................................................................... 4
3
Which entities are impacted by the Code? .................................................................................. 5
4
Development Process.................................................................................................................... 6
5
4.1
Consultation .............................................................................................................................. 6
4.2
Submissions .............................................................................................................................. 6
4.3
Final Report .............................................................................................................................. 7
Early adoption mechanism ........................................................................................................... 8
© Ann-Maree Wolff, CTA, 2016
2
Ann-Maree Wolff, CTA
Tax Transparency is Here to Stay
1 Overview As part of the 2016 Budget the Australian Government announced the release of the Board of Taxation (the Board) report on a voluntary tax transparency code (the Code). The Code is a set of principles and ‘minimum standards’ to guide disclosure of tax information by businesses. The Code was developed by the Board of Taxation at the Treasurer’s request to:
encourage large and medium-sized businesses to publicly disclose their tax affairs to highlight those that are paying their fair share and to encourage all businesses not to engage in aggressive tax avoidance; and
for large businesses to take the lead, to become more transparent and help educate the public about their compliance with Australia’s tax laws.
© Ann-Maree Wolff, CTA, 2016
3
Ann-Maree Wolff, CTA
Tax Transparency is Here to Stay
2 Why the Code was developed The Code was developed in response to Government and community expectations that large businesses be more publicly transparent about their tax affairs. As such, in the 2015 Budget, the Treasurer announced that the Board of Taxation would lead the development of the Code. The Code is more advanced and more comprehensive than existing tax transparency measures from other countries and organisations. Due to the flexibility in the Code the Board has received strong support from businesses and associations. The Board believes that the Code’s voluntary nature will lead to the disclosure of greater and higher quality information. The Board wants senior management to be actively involved in the decision to adopt the Code. The aim of this is to drive cultural change within the corporate sector towards greater tax transparency. If the Code were mandatory, the Board is of the view that the exercise would be seen as a compliance and box-checking exercise delegated to lower levels within the organisation with less impact on the disclosure culture of the organisation.
© Ann-Maree Wolff, CTA, 2016
4
Ann-Maree Wolff, CTA
Tax Transparency is Here to Stay
3 Which entities are impacted by the Code? The Code disclosure is divided into two parts. A summary of the content of Part A and Part B is set out below.
Code disclosure
Who
Minimum standard of information
Part A
‘Large’ and ‘medium’ businesses
A reconciliation of accounting profit to tax expense and to income tax paid or income tax payable Identification of material temporary and non-temporary differences Accounting effective company tax rates for Australian and global operations (pursuant to AASB guidance)
Part B
‘Large’ businesses
Approach to tax strategy and governance Tax contribution summary for corporate taxes paid Information about international related party dealings
Entities with Australian turnover of $100 million or greater (‘large’ and ‘medium’ businesses) are encouraged to adopt Part A of the Code. This involves disclosing a reconciliation of accounting profit to income tax paid each year and effective tax rates for Australian and global operations. Entities with Australian turnover of $500 million or greater (‘large’ businesses) are encouraged to adopt Part B of the Code. This involves disclosure of additional information related to the company’s approach to tax strategy and governance (including details of dealings with the Australian Taxation Office), details of all Federal, State and local tax contributions and details about international related party dealings. Superannuation funds, trusts or partnerships are also encouraged to adopt the principles of the Code where possible.
© Ann-Maree Wolff, CTA, 2016
5
Ann-Maree Wolff, CTA
Tax Transparency is Here to Stay
4 Development Process On 14 July 2015 the Board was issued with terms of reference and established a working group of its members to oversee the development of the Code. The Board members of the Working Group were Michael Andrew AO (Chair of the Working Group), John Emerson AM, Ann-Maree Wolff and Neville Mitchell. The Working Group also included an Expert Panel consisting of Fiona Martin of the University of New South Wales, Victor Timos of Incitec Pivot and David Watkins of Deloitte. The Working Group also included representatives of the Treasury and the Australian Taxation Office. The Working Group was also assisted by members of the Board’s Secretariat. The Board was extremely encouraged by the level of community engagement during the development of the Code.
4.1 Consultation The Board’s consultation process involved:
Public and targeted consultation meetings with industry, tax practitioners, academics and representatives of community groups throughout August and September 2015;
Release of a Consultation Paper in December 2015 to invite and facilitate written submissions; and
Discussions with stakeholders following the release of the Consultation Paper.
4.2 Submissions The Board received 19 written submissions, including one confidential submission, in response to the Consultation Paper. These submissions were broadly supportive. The key concerns raised in the submissions were:
The need for further clarification regarding where the information in Part A and Part B can be displayed;
Further assurances that the information in a ‘taxes paid’ report is accurate;
Further guidance was requested regarding the calculation of effective tax rates;
The inconsistency of the tax policy, tax strategy and governance minimum standard with international examples;
The potential retrospectivity of the commencement date;
The interaction of the Code with other legislative requirements; and
© Ann-Maree Wolff, CTA, 2016
6
Ann-Maree Wolff, CTA
Tax Transparency is Here to Stay
The need for further clarification on which entity within a group should disclose under the Code.
4.3 Final Report The Board considered the issues raised by stakeholders in their submissions and at the consultation meetings, and the views of the Working Group, Treasury and the ATO in preparing its final report. The Board’s recommendations reflect its independent judgment. A copy of the full report can be found on the Board’s website - http://taxboard.gov.au/consultation/voluntary-tax-transparency-code/ .
© Ann-Maree Wolff, CTA, 2016
7
Ann-Maree Wolff, CTA
Tax Transparency is Here to Stay
5 Early adoption mechanism Business associations such as the Business Council of Australia, Corporate Tax Association and G100 are actively encouraging their members to comply. Many companies have been proactively considering how they can comply with the Code. The Board maintains a register of those organisations who have committed to applying the principles and the details of the Code and these are published on the Board’s website. In addition, the Board is aware of a number of companies who have internal processes currently underway to adopt the Code. In order to indicate your organisations intention to adopt the Code, you can contact the Board of Taxation on the below details. E-mail: [email protected]
Mailing Address: The Board of Taxation C/- The Treasury Langton Crescent PARKES ACT 2600
Given the high level of support for the Code, the Board considers it has achieved the appropriate balance between increased transparency and commercial sensitivity.
Ann-Maree Wolff Board of Taxation August 2016
© Ann-Maree Wolff, CTA, 2016
8
