Australia abandons the proposal to compel companies to reveal worldwide tax information

In response to resistance from business associations, the Australian government has moderated a recently proposed law aimed at addressing profit-shifting by some of the largest global corporations.

Multinational corporations have secured a postponement from a newly proposed law that would have mandated public disclosure of their global tax payments.

In late June, just days before the self-imposed deadline for the plan’s implementation, the Australian government retreated from its commitment to a public country-by-country reporting initiative. This initiative would have compelled companies to furnish detailed accounts of their global operations starting from July 1. The decision followed intense lobbying from business interests, expressing concerns that the proposed legislation could adversely impact Australia’s global economic competitiveness.

The initially proposed legislation, a pledge from the ruling Labor Party, aimed to compel companies with global revenues exceeding AU$1 billion (approximately $668 million at the time) to publicly reveal details such as their held assets, paid taxes, and effective tax rates in each country of operation.

This public country-by-country reporting was designed to curb corporate profit-shifting, estimated by a 2021 UN report to cost the countries where the profits are generated between $500 billion to $650 billion annually. However, in late June, the government introduced revised legislation that diluted the data disclosure requirements and deferred the implementation of the new law until July 2024.

A diverse array of multinational companies exerted pressure on the government, contending that the proposed regulations could compel firms to disclose commercially sensitive data, surpassing the transparency measures implemented by the European Union. On June 15, The Australian Financial Review reported that a coalition of global fund management groups, with investments exceeding $120 trillion, urged Australia’s Treasurer to revise the legislation. The Business Council of Australia, representing some of the nation’s largest companies, also expressed opposition, stating that the legislation would “significantly increase the cost of doing business in Australia.”

Global technology giants, including members of the Silicon Valley Tax Directors Group such as Alphabet, Apple, Netflix, Meta, and Microsoft, voiced their opposition to the new disclosure requirements. They argued that public country-by-country tax reporting “will seriously undermine existing collaborative relationships between the [Australian Tax Office] and taxpayers.” Although the group sought to keep its letter opposing the legislation confidential, its comments were ultimately published on the Treasury’s website.

Following the unveiling of the modified legislation by the Australian government, Assistant Minister for Competition Andrew Leigh stated that Australia aims to align its policies with the European Union’s rules. Although the revised legislation falls short of the initial proposal’s ambition, some transparency advocates view it as a significant step forward.

Ian Gary, the executive director of the Financial Accountability and Corporate Transparency Coalition, remarked, “While Australia’s delay in implementing public country-by-country reporting is disappointing, the revised measures outlined by the government would still represent a monumental leap forward for international tax transparency.” Even with the amended legislation, he emphasized that “Australia would lead the pack in providing investors, lawmakers, and other stakeholders with information that they have been seeking for years.”

Despite this progress, stakeholders must wait at least another year for the new rules to come into effect. During this period, transparency advocates will be keenly observing whether Australia fulfills its commitment to shed light on multinational firms’ profit-shifting practices.