Some U.S. Corporations Would Report Under Draft Australian Legislation Requiring Multinationals to Publish Tax and Operational Data
Washington, DC – The Financial Accountability and Corporate Transparency (FACT) Coalition today welcomed the introduction of groundbreaking draft legislation by the Australian federal government to require world-wide, public country-by-country reporting of key tax and operational data for many large multinational enterprises (MNEs) doing business in Australia. The legislation – first announced in a Treasury budget proposal last October, and expected to pass through the Australian Parliament this year – represents the first PCbCR regime with global reach to be advanced by any major jurisdiction.
“The introduction of this legislation in Australia is a game-changer in the fight for a fairer, more transparent international tax system,” said Ian Gary, executive director of the FACT Coalition. “Understanding where multinational corporations are doing business and paying – or not paying – taxes is a vital step towards ending the era of corporate tax avoidance that has robbed governments worldwide of much-needed revenues and exacerbated global inequality. FACT applauds the Australian government for its leadership on this important initiative.”
The legislation proposed today would require certain large multinational enterprises to publicly report information including total revenues, profits, taxes paid, number of employees, effective tax rate, and other key metrics, disaggregated on a country-by-country level “derived predominantly” from standards set by the Global Reporting Initiative (GRI). Because this reporting regime would cover foreign-headquartered entities with “permanent establishment” in Australia, it is likely that many U.S.-based multinationals would be captured by the new reporting requirements. While the European Union has put in place a limited form of public country-by-country reporting, Australia is the first jurisdiction to propose truly global reporting standards.
“This move will increase transparency and accountability and shine a bright light on where and how multinationals shift profits to avoid the obligation to help fund essential public services and infrastructure around the world,” said Jason Ward, Principal Analyst at the Centre for International Corporate Tax Accountability & Research (CICTAR) in Australia. “Exposure of current practices will encourage an end to abusive tax schemes everywhere.”
For years, pressure has mounted from diverse corners to require greater disclosure of tax and operational data from the world’s largest corporations. While legislators and advocates have pushed PCbCR as a means by which to reveal and address patterns of tax avoidance by large multinationals, investors have meanwhile begun to demand this data in order to better gauge the tax planning, geopolitical, and regulatory risks associated with particular firms.
Just last year, investors advanced shareholder resolutions calling on Amazon, Microsoft, and Cisco to begin publishing tax and operational data on a country-by-country basis, garnering the support of independent shareholders collectively representing hundreds of billions of dollars. This year, oil giants Exxon, Chevron, and ConocoPhillips will face similar resolutions introduced by FACT member Oxfam America.
“In the wake of tax dodging scandals that have captured the country’s headlines and undermined its collection of public revenues, Australia is leading the way forward in requiring disclosures that investors and citizens around the world have demanded,” said Daniel Mulé, Policy Lead for Extractive Industries Tax and Transparency at Oxfam America. “As ExxonMobil, Chevron, and ConocoPhillips face shareholder proposals next month to get these companies to publish tax transparency reports, Australia – a country already burned by ExxonMobil and Chevron’s aggressive tax avoidance practices in the past – has made the prudent choice to require companies to release such reporting.”
U.S. legislators, led by Sen. Van Hollen, have championed legislation to require the Securities and Exchange Commission (SEC) to mandate public country-by-country reporting as a means to protect investors. A companion bill passed the U.S. House in 2021. Yet, as FACT has previously argued, the SEC already has the authority to require PCbCR for large multinational filers. As Australia’s inches towards implementing its own standard, the SEC could act simultaneously to head off potentially contradictory reporting regimes and implement PCbCR requirements in line with GRI standards for all large multinational filers.
“While companies face changes in national and global tax rules, increased tax enforcement, and geopolitical risks, investors need public country-by-country reporting to determine how these developments will materially impact their portfolios,” said Gary. “By adopting a regime like the one currently being advanced in Australia, the U.S. could help set a standard of tax transparency capable of addressing the challenges facing today’s digital global economy. There’s no time to waste. The SEC should start rulemaking to implement public country-by-country reporting this year.”
Notes to the Editor:
- An exposure draft of the proposed Australian law, among other materials, can be found here. The public country-by-country reports would be made available on an Australian government website. Reporting would be required for income years commencing on or after July 1, 2023. The Australian government summary said that “the information will be reported in a standardized format and be centrally hosted to facilitate comparability across entities, jurisdictions, and reporting periods – building up a database that will increase in value over time for the public to access.”
- Read the Australia-based Centre for International Corporate Tax Accountability & Research’s press release on the draft legislation here.
- The Global Reporting Initiative tax reporting standards on which today’s legislation is based can be found here.
- Read the latest FACT Sheet detailing the need for the SEC to require PCbCR from large multinationals here.
- FACT’s recent report, “A Material Concern: The Investor Case for Public Country-By-Country Reporting” can be found here.
- SEC Chair Gary Gensler expressed interest in greater disclosure requirements during Senate testimony last September.
- A bill that would direct the SEC to require PCbCR for large U.S. multinational filers was reintroduced to Congress in March by Senator Chris Van Hollen.