Every year, Australians get to know how tax is paid by large corporations and multinational companies to fund their schools, hospitals, roads as well as all other social and welfare services. Income Tax Transparency Law 2015 mandates this report for public debate on tax policy, particularly on corporate taxation.
The large corporate tax transparency population includes Australian public and foreign-owned entities with total income of $100 million or more; Australian-owned resident private entities with total income of $200 million or more; entities that have petroleum resource rent tax (PRRT) and entities that have minerals resource rent tax (MRRT) payable to the ATO. The size of corporate tax transparency population in 2014-15 was 1,904, compared to 1,642 in 2013-14.
There are approximately 1.2 million companies operating in Australia and they reported total income tax payable of $67 billion in 2014–15. The 1,904 corporate tax transparency population paid almost 65 per cent of that amount. Proportionally, tax payable is dominated by the financial services and mining industries, reflecting the importance of these industries in the Australian economy.
Of the 1,904 entities in the large market, 64 per cent paid tax in 2014–15 and the rest 36 per cent did not pay any tax as they did not generate taxable income. The highest level of nil tax payable industries include energy, resources and manufacturing. Despite generating high total income, Qantas paid no tax in 2014-15 because it made a loss in tax accounting.
Australian taxation system and tax legislation are complex and hence, it is hard to extrapolate which corporates did not pay their fair share of tax based on a tax position in a particular financial year. No tax paid in a particular year does not necessarily mean tax avoidance and non-payment of tax does not essentially equate non-compliance with tax laws.
The regulators have to engage in real time with large corporations and multinationals to ensure a fair amount of tax is paid to fund services to all Australians. They should utilise data from various sources and conduct trend analysis on profits made and tax paid. They must investigate corporate restructuring of Australian businesses to minimise or at times eliminate tax liability.