Introduction
A public country-by-country (CBC) reporting regime is proposed for large multinational enterprises in Australia. The proposed reporting obligations are in line with the global reporting initiative GRI 207 on tax transparency that was launched in 2019. This development is welcomed amidst growing expectations for multinational enterprises (MNEs) to fully develop and implement their corporate tax strategies, with tax transparency being a key focus area.
What is required?
Schedule 4 to the Treasury Laws Amendment (Responsible Buy Now Pay Later and Other Measures) Bill 2024 (the Bill) proposes to require certain multinational enterprises to publish selected tax information on a CBC basis for specified jurisdictions, on either a CBC basis or an aggregated basis for the rest of the world. The information would be published on an Australian government website, with publication facilitated by the Commissioner.
This measure implements Australia’s public CBC reporting regime announced by the government in the October 2022–23 Federal Budget as part of its multinational tax integrity election commitment package. According to the explanatory memorandum to the Bill, the measure aims to improve information flows to help the public compare entity tax disclosures to better assess whether an entity’s economic presence in a jurisdiction aligns with the amount of tax they pay in that jurisdiction.
How it aligns with other global tax requirements
This development aligns with recent international efforts to promote tax transparency among multinational enterprises, such as GRI 207 and EU Directive 2021/2101. Launched by the Global Reporting Initiative (GRI) in 2019, GRI 207 is the first global reporting standard for tax transparency. It helps organisations understand and publicly share information about their tax practices. It supports the public disclosure of a company's business activities and tax payments on a CBC basis. GRI 207 requires broader disclosures than EU Directive 2021/2101, which mandates public CBC reporting by large multinationals to enhance corporate transparency and public scrutiny.
The proposed measure will complement the confidential CBC reporting requirements in Subdivision 815-E of the Income Tax Assessment Act 1997 (ITAA 1997). This Subdivision implements Action 13 of the OECD/G20 Action Plan on Base Erosion and Profit Shifting (BEPS). Subdivision 815-E and the proposed public CBC reporting obligations will operate in parallel but are distinct and separate reporting regimes.
Public CBC reporting obligations are imposed on certain “CBC reporting parents” if, among other things, $10 million or more of their aggregated turnover for the income year is Australian-sourced, unless otherwise exempt. If enacted, the measure would apply to reporting periods commencing on or after 1 July 2024.
The CBC reporting parent will be required to publish selected tax information relating to itself and its CBC reporting group. The information relates to presence and tax dealings in particular jurisdictions. For Australia and jurisdictions specified by the Minister, particular information must be published on a CBC basis. For the remaining jurisdictions the CBC reporting group operates in, the CBC reporting parent can choose to publish information on either a CBC basis or an aggregated basis.
If the CBC reporting parent chooses to report on a CBC basis for all jurisdictions the CBC reporting group operates in, it does not need to publish any information on an aggregated basis. However, if it only publishes information on a CBC basis for Australia and specified jurisdictions, it must also publish information on an aggregated basis for the remaining jurisdictions the CBC reporting group operates in.
The proposed disclosures are based on GRI 207, which will serve as the primary guidance for interpreting the reporting requirements. Additionally, consideration should be given to the OECD’s Transfer Pricing Guidelines for Multinational Enterprises and Tax Administrations (last amended on 7 January 2022) and the Guidance on the Implementation of Country-by-Country Reporting: BEPS Action 13 (2022). The inclusion of the OECD Transfer Pricing Guidelines aims to reduce the compliance burden on entities already familiar with them, as they are used for meeting confidential CBC reporting obligations under section 815-355(3)(c) of the ITAA 1997.
The CBC reporting parent is required to provide the requisite tax information to the Commissioner in the approved form within 12 months after the end of the reporting period to which it relates. The Commissioner will then make the information available on an Australian government website as soon as practicable. Penalties apply for non-compliance.
Status and recommendations
The Senate Standing Committee on Economics recommended in August 2024 that the measure be passed. Impacted organisations should refer to the committee’s report on its consideration of various submissions received from relevant stakeholders.
This new regulatory landscape emphasises tax transparency and accountability for large multinational enterprises (MNEs). To ensure requirements are fulfilled and reporting obligations are fully adhered to, multinational enterprises are encouraged to familiarise themselves with the proposed legislative amendments in the Bill.
