Large Business Compliance. Jim Killaly, Deputy Commissioner, Large Business and International, Australian Taxation Office. Increasing internationalisation of the Australian economy debate on sovereignty and local interest increasing stocks and flows of investment and income
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Jim Killaly, Deputy Commissioner,
Large Business and International,
Australian Taxation Office
debate on sovereignty and local interest
increasing stocks and flows of investment and income
repatriation of profits is a big issue
strong interest in renegotiation of DTAs
increasing levels of foreign ownership
community expectations about corporate citizenshipEnvironment
Australia’s international investment position (ABS)
The average annual growth for Australian investment abroad over the last ten years was
13.1% and for Foreign investment in Australia it was 9.% . This compares with the
average annual growth of nominal GDP which was 5.9%. Outward is growing twice as
strongly and inward one and a half times as strongly as GDP.
increasing concern on “branch office syndrome”
debate on fiscal policy and its role in competitiveness
bank and commercial secrecy
markets/ business opportunities
mergers and acquisitions
capital markets and capital management
volatility of interest and exchange rates and commodity prices
risk management a driving focus
Increasing share of global trade and investment being managed by MNEs
Significant increase in related party dealings
$50 billion rise in income and expenses in two years
Heightening focus on international financing and financial markets
Debate on sustainable economic development
Technology revolution managed by MNEs
Government is redefining itself
Marked shift in the balance of portfolio and direct investment and shareholder voice
implications for “patient” investment
Increasing questioning of value systems and institutions
Significant expanding use of tax planning to avoid policy intent
Reducing impact of imputation
1. An international tax system that facilitates investment and trade, promotes corporate citizenship and improves the social and economic wellbeing of the Australian community.
Effective management of harmful tax competition:
to prevent distortion of investment
to ensure Australia remains internationally competitive.
Australian views reflected in decisions of international tax forums.
International - Desired Future - Goalposts for Success
2. International tax policy and law which aligns with the proper functioning of markets, positions Australia well and ensures that Australia gets its fair share of tax.
System ignores conduit activity and reflects economic substance and value added.
Australia’s tax treaty network is maintained and enhanced to ensure Government objectives are met.
Assessment and collection systems are effective
High level of cooperation between revenue authorities to share information, resolve disputes and protect the legitimate interests of Australian residents.
A community of revenue authorities that actively promotes the ongoing improvement of taxation administration
International - Desired Future - Goalposts for Success
Corporate Pathways proper functioning of markets, positions Australia well and ensures that Australia gets its fair share of tax.
LB&I High Level Design : Systemic Management - Strategic Market & Client Focus
National Industry Groups
National Client Group
Energy and Resources
Middle Market Alliance (LB&I)
Middle Market Alliance (SB)
(Note: displaying the Alliance is not meant to imply increased ownership by LB&I)
Projects commissioned by the GMT
Technical Excellence & Integrated Tax Design
National Practices - optimising business ‘praxis’ in core processes
2 proper functioning of markets, positions Australia well and ensures that Australia gets its fair share of tax.
Note: 1 The remaining 9000 (middle market) economic enterprises account for the remaining 10% of tax assessed
2 Turnover ~ $800 million
3 Turnover ~ $100 million
Average growth for LB&I over the period = 13% pa proper functioning of markets, positions Australia well and ensures that Australia gets its fair share of tax.
Average growth for nominal GDP over the period ~ 6% pa
Average growth in LB&I collections over the period = 12% pa proper functioning of markets, positions Australia well and ensures that Australia gets its fair share of tax.
(10% pa adjusted for the PAYG bring-forward)
The Number of LB&I Audit Results proper functioning of markets, positions Australia well and ensures that Australia gets its fair share of tax.
(collections & adjustments)
Fieldwork Stock over Four Years proper functioning of markets, positions Australia well and ensures that Australia gets its fair share of tax.
Results from Audit Activity of Large Business Sector proper functioning of markets, positions Australia well and ensures that Australia gets its fair share of tax.
Tax and Penalties ($m)
Notional Tax ($m)
Why have a Cooperative Compliance Model? proper functioning of markets, positions Australia well and ensures that Australia gets its fair share of tax.
explanation to large business and the community
translation of ATO strategic models to large business compliance activityWhy have a Cooperative Compliance Model?
From transactions to functions assets and risks
From price to profit channel, the profit drivers and margins
Benchmarking economic performance
Understanding business strategy and investor mindset
Awareness of structuring location and changes
Awareness of interaction of tax systems and impacts on investment, trade and income flowsInsights from Transfer Pricing Casework
Need for a global perspective and solution relationships
Clarifying the rules and methodologies
Positioning the program
Building and continuing a relationship
Facilitating risk assessment
Moving from confrontation to cooperation
Insights from Transfer Pricing Casework
Patterns & Trends
It is the community’s tax system relationships
A systemic behavioural approach needed
keeping the people in the picture and building relationships across all functions
tax system part of wider global socio-economic system
tax administration should reflect market and business realities, not impede business, and operate in real time
tax performance needs to be evaluated against economic performance
tailored approaches appropriate to the risks
Need to engage industry & MNEs with underlying tax policy and LB&I’s programsPhilosophy of Administration
There are several interrelated drivers of compliance relationships
“compliance” needs to be reframed to reflect them all
industry needs to be part of an ongoing dialogue on this and have a design role
a balanced multifunctional program is needed to support the new approach
Tax administration needs to be transparent
publication of strategic statement
publication of risk model and methodology
mirroring of each other’s performance
Philosophy of Administration
Relating professionally relationships
Balancing self regulation with enforcement
Improving the quality of the law
Meeting community expectationsFive key themes
Figure 1 The compliance pyramid relationships
Cooperative compliance is about movement; both up and down the pyramid, from active enforcement measures at the top,
to self regulation and cooperation at the base
Self-regulation and cooperation
Self-regulation philosophy in Model in line with relationships
The taxpayer can independently:
Take a position on issues
Conduct due diligence & risk assessments
ATO freed up to focus on:
Higher risk issues
Increased and more effective coverage
Co-designed with the members of the CCC. relationships
Released in November and available to taxpayers
LB&I and GST Large Enterprise Compliance using it; influenced ATO restructuring
Large business asking about their risk category
Philosophy being explained and brought to life within the ATO.
CCC sub-committee oversighting implementationWhat has happened?