Tax transparency push may not deliver desired outcomes

The tax directors at leading companies in Australia and New Zealand say the push by governments and authorities to drive new levels of transparency in tax reporting and regulation will require additional resources and investment in technology.

However, less than half believe this push will help overcome some of the challenges being experienced in relation to transfer pricing, base erosion and profit shifting. These findings form part of a survey recently released by Thomson Reuters.

Corporate tax transparency for large companies in Australia is now a legislated requirement following amendments to the tax law to:

require the Tax Commissioner to publish limited information about the tax affairs of large corporate taxpayers;
allow for the publication of certain aggregate tax information irrespective of whether the publication, in conjunction with publicly available information, may be reasonably capable of being attributed to a particular taxpayer (other than a natural person);
allow for enhanced information sharing between government agencies in relation to decisions under the Foreign Acquisitions and Takeovers Act 1975 and Australia’s Foreign Investment Policy.

A total of 89% of those surveyed concur that governments and regulatory authorities are pushing hard for increased tax transparency. However, less than half (43%) believe this global push will deliver better outcomes and improved clarity.

The Thomson Reuters 2013 Tax Survey, which gathered feedback from the tax directors of 125 leading companies in Australia and New Zealand, found the three key impacts of this drive to improve levels of transparency were:

increased pressure on in-house tax teams to deliver compliant lodgments (60%);
a need for additional resources for internal tax compliance (48%); and
a requirement to invest in additional technology (47%).

Commenting on the study, Paul Brindle, managing director for the tax and accounting business in Australia and New Zealand of Thomson Reuters, said: “There is no doubt Australian and New Zealand companies are feeling the effects of increased pressure regarding data transparency. However, there appears to be a reluctance to respond appropriately at this point, with many saying they do not plan to make any significant changes to their operations in the near future.”

Uncertainty a problem

More than half (54%) of respondents said ongoing uncertainty around new regulations and a lack of guidance around tax rulings was causing significant concern, particularly in relation to transfer pricing legislation. Despite 34% having plans to adopt technology solutions to manage transfer pricing demands, almost half (49%) have no plans to change in response to increasing regulation.

“Transfer pricing is at the frontline of the push for transparency,” said Brindle. “And with transparency now one of the key focus areas for tax authorities globally, Australian and New Zealand companies need to consider how this will affect them. They need to put plans in place to be able to handle the pressure on people and resources that will inevitably increase moving forward.”

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