Experts warn SMEs could get caught in proposed multinational tax crackdown

The tax industry has raised a red flag over a Treasury discussion paper released by the federal government in reaction to public outcry over the lack of transparency regarding the tax payments of major international companies.

Taxpayers have been voicing their concerns over the limited amount of tax information revealed by international companies such as tech giants Apple and Google, after reports surfaced the companies pay minimal tax on large revenue figures.

Now, the Tax Institute says a new proposal would mandate businesses earning over $100 million reveal “limited” tax information.

“The exact form of these publications would be left to the [Tax] Commissioner but could, for example, be published on the ATO’s website,” the discussion paper proposes.

“Specifically, for corporate tax entities with a reported total income for the year of $100 million or more, the Commissioner would publish their Australian Business Number (ABN) and name, as well as their reported total income, taxable income and income tax payable.”

Robert Jeremenko, senior tax counsel at the Tax Institute, told SmartCompany the proposal could impact small businesses. The Australian Tax Office definition of SMEs ranges from $2 million in revenue to $250 million.

While Jeremenko says it’s important the government focuses on “revising our international tax rules…transparency also risks causing widespread confusion”.

“By simply disclosing headline income and tax numbers, companies that have acted legitimately risk being unfairly tarred with the tax avoidance brush unless the government fully explains the numbers.”

In a statement, Assistant Treasurer David Bradbury said it’s important companies using “complex arrangements and contrived corporate structures to avoid paying their fair share of tax” are targeted.

Jeremenko agrees, but says small businesses shouldn’t be caught in the crossfire.

“It is important that the government focuses on revising our international tax rules in conjunction with our major trading partners to make sure that Australia collects an appropriate share of corporate tax.”

The discussion paper says the ATO will not reveal the identities of individual taxpayers – a concern some tax groups had before the paper was released.

Concerns over the ATO’s unintentional targeting of SMEs were raised in February. CPA Australia told SmartCompany at the time that SMEs could fit into the category of multinational businesses in some circumstances, while the Institute of Chartered Accountants also raised a warning.