Tax Laws Amendment (Tougher Penalties for Country-by-Country Reporting) Bill 2016 [No 2] – Private members Bill to increase C-b-C reporting penalties up to 1500 units ($270k at present)

• In 2015 Parliament passed the Tax Laws Amendment (Combating Multinational Profit Shifting) Act which strengthened Australia’s anti-avoidance laws and created the new legal classification of ‘significant global entity’ for companies with global turnover above $1 billion.
• Significant global entities must now provide the Commissioner of Taxation with an annual country-by-country report detailing their economic activity and tax paid in every jurisdiction where they do business.
• Country-by-country reporting is a key initiative for addressing multinational tax avoidance. However, under the current provisions of the Taxation Administration Act 1953, the maximum penalty companies are liable for, if they fail to lodge these reports, is $5,400 (30 penalty units). This raises the strong possibility that global firms will simply opt to pay the fine rather than lodge their country-by-country reports.
• This Private Members Bill amends the Income Tax Assessment Act 1997 to introduce a specific penalty regime for significant global entities with country-by-country reporting obligations.
• Under this new regime, the maximum penalty for failure to lodge a country-by-country report will be $270,000 (1500 penalty units).
• The bill also empowers the Commissioner of Taxation to audit firms which still fail to lodge their reports after the maximum financial penalty has been reached.

[APH website – Explanatory Memorandum]

Subdivision 287-C—Penalties for failing to comply with reporting obligations for significant global entities

Table of sections

287-75 Liability to penalty

287-80 Amount of penalty

287-85 Examination of affairs for extended non-compliance

287-75 – Liability to penalty

You are liable to an administrative penalty if:

(a)  you are required by section 815-355 of the Income Tax Assessment Act 1997 to give a statement to the Commissioner in the *approved form by a particular day; and

(b)  you do not give the statement to the Commissioner in the approved form by that day.

 287-80 – Amount of penalty

(1)  The amount of the penalty is 125 penalty units for each period of 28 days or part of a period of 28 days starting on the day when the statement is due and ending when you give it (up to a maximum of 1500 penalty units).

Note: See section 4AA of the Crimes Act 1914 for the current value of a penalty unit.

(2)  In working out the amount of the penalty, the amount of a penalty unit is the amount applying at the start of the relevant 28 day period.

(3)  The fact that you have not yet given the statement does not prevent the Commissioner notifying you that you are liable to an administrative penalty under this Subdivision. That penalty may be later increased under this section.

Note: The Commissioner is required to notify you of an administrative penalty: see section 298-10.

287-85 – Examination of affairs for extended non-compliance

The Commissioner must consider making an examination of the affairs of a *significant global entity if:

(a)  the entity is required by section 815-355 of the Income Tax Assessment Act 1997 to give a statement to the Commissioner in the *approved form by a particular day; and

(b)  the statement is not given in the approved form before the end of the eleventh period of 28 days mentioned in subsection 287-80(1).