CA ANZ pushes for deferral of multinational tax changes
CA ANZ has urged the government to delay parts its multinational tax transparency bill with country-by-country reporting now deferred till July 2024.
The bill to implement the government’s multinational tax transparency measures is flawed in several ways and will likely result in different outcomes for taxpayers depending on their legal structures and borrowing arrangements, CA ANZ has warned in a recent submission.
In a submission Senate Standing Committee on Economics, CA ANZ has called for the start date for schedule 1 of the Treasury Laws (Making Multinationals Pay Their Fair Share – Integrity and Transparency) Bill 2023 to be deferred to a later date.
The accounting body said this would provide time for further consultation with the Australian Accounting Standards Board and Auditing and Assurance Standards Board (AUASB) to develop a practical and informative reporting requirement that achieves the stated policy objectives, without imposing additional compliance burden for minimal benefit.
“We are concerned that the inconsistency of the terminology used in the Act will have implications for audit standards,” the CA ANZ submission said.
CA ANZ said deferring the start date of schedule 1 of the bill was also important given that public country-by-country reporting has been deferred to 1 July 2024.
The EM comments on the non-inclusion of certain matters in the Bill, including public country by country reporting and payments for the exploitation of intangibles that are subject to tax in low corporate tax jurisdictions.
“Country by country reporting is seen as particularly contentious within the tax community and within OECD circles,” the submission said.
“CA ANZ understands that there will be consultation and hopes that impacted taxpayers will not be blind-sided by hastily drafted legislation rushed through Parliament with impractical, short start dates.”
By deferring the schedule 1 of the bill, CA ANZ said this would allow time to consider whether there are opportunities to streamline public tax reporting particularly on the disclosures relating to tax residency of subsidiaries.
“Tax residency may not be a black and white answer and asking directors of companies to opine on whether tax residency is “true and correct’ is unreasonable,” the submission said.
“The Committee should seek input from Treasury officials on their work program for these proposed measures.”
CA ANZ also said that the poorly drafted legislation will mean the ATO will have a lot of work to do in crafting public advice and guidance to create ‘work-around’ solutions.
At this stage, the ATO has not engaged in public consultations on a draft Law Companion Ruling (LCR)1.
“CA ANZ understands that ATO officials would have had input to the drafting of the Bill and we urge the Committee to recommend that the ATO release a draft LCR as a matter of urgency,” the submission said.
Lack of transition time for thin capitalisation measures ‘extremely disappointing’
The submission also noted the “truncated consultation process and drafting of the bill” which reflects the government’s desire to implement the measures from 1 July 2023.
“The lack of transition time, particularly for June balancing taxpayers, for the modified thin capitalisation measures to allow for consideration of the impact and for any restructuring of existing financial arrangements is extremely disappointing,” the accounting body stated.
“We query whether the impact statement in the EM has adequately taken into consideration the impact the hard 1 July 2023 start date will have on private sector decision making and whether debt issuers were surveyed to establish whether they have sufficient time to refinance issued instruments in an orderly manner.”
“At the very least, and in light of concerns expressed to CA ANZ regarding the previously unseen Subdivision 820-EAA (the Debt Creation Rules), the Committee should recommend a deferred start date for this particular aspect of the Bill. This would allow time for officials from Treasury and the ATO to engage with stakeholders on both the drafting and practical interpretation of the Debt Creation Rules.”
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