More than 800 large businesses paid no tax in 2021-22, a report from the Australian Taxation Office (ATO) reveals.
The ATO’s ninth corporation tax transparency report, which covers 2,713 companies, found that while the amount of tax collected has increased due to soaring profits from mining and rising oil prices, 831 (31 percent) have still not paid a cent of their taxes. tax.
The report attributes the lack of taxes to a variety of reasons, including companies recording an accounting loss or claiming tax offsets that reduced their tax bill to zero.
“This proportion (of nil tax paid) is similar to ASX data, which shows that around 20 to 30 per cent of ASX 500 companies report a net loss to their shareholders in a given year “, the ATO said in its report.
The 2021-2022 report includes data from 2,713 entities, a net increase of 245 entities, that paid a cumulative total of $83.8 billion in income taxes.
That’s $15.2 billion more, an increase of 22 percent, from the previous year, and almost 50 percent more than two years ago, the agency said.
ATO Deputy Commissioner Rebecca Saint said the significant increase in taxes came from the mining sector, reflecting strong commodity prices.
Ms Saint said the 2022 revenue year was the first year the mining sector paid more tax than all other sectors combined – “something we haven’t seen in the history of the transparency report of corporate tax”.
“In fact, the mining sector paid more tax in 2021-22 than the total tax of all sectors in each of the first three reporting years,” Ms Saint said.
Strong post-COVID economic recovery has led to increased tax revenues
Australia’s large taxpayers have recovered from COVID-19 and lockdowns and the tax avoidance task force has had some success in recovering revenue, Ms Saint said.
“The increase in population mentioned in the report as well as taxes paid not only reflect the favorable economic conditions at the time, but also the high levels of tax compliance of most large businesses in Australia,” Ms. Holy.
Since the Tax Avoidance Taskforce was established by then-Treasurer Joe Hockey in 2016, the government has collected $27.7 billion in additional tax revenue from multinational companies and large public and private companies.
In the 2022-23 year, the ATO said it secured a record $6.4 billion in tax revenue from state-owned and multinational companies alone.
ATO still trying to recover billions from multinationals
But ABC News also asked the ATO how many businesses are currently contesting the tax bills the agency has imposed on them.
The ATO said 139 companies had assessments made against them in the 2023 financial year, worth $2.6 billion.
About $1.7 billion of the $2.6 billion was disputed by 21 different taxpayers, he said, and some of that $1.7 billion had already been paid to the ATO in the part of a 50/50 agreement.
Significant amounts are still the subject of disputes during previous years:
- Regarding the $2.3 billion in assessments still in dispute from 2022, the ATO responded that “approximately $1.9 billion remains in dispute relating to 16 different taxpayers”.
- Regarding the amount of the $2.5 billion in assessments in dispute from 2021, he responded that “approximately $1.9 billion remains in dispute involving 11 different taxpayers.”
- Regarding the amount of the $1.5 billion in assessments in dispute from 2020, he said “$965 million remains in dispute involving 12 different taxpayers.”
Australian businesses are more frequently approaching the ATO to request advanced pricing agreements (APAs) – an agreement between the agency and the business on what future taxes they are expected to pay and on what terms .
The agency told ABC News that for fiscal year 2021-22, 89 APPs were in place, for fiscal year 2022-23, 76 were in place and for fiscal year 2021-22, 101 were in place.
Reasons why businesses report “zero” tax
The ATO is required by law to publish tax information provided to it by certain large businesses each year.
This year’s tax transparency report covers 2,713 legal entities, including:
- 1,496 are foreign companies with revenue of $100 million or more
- 590 are Australian public entities with revenue of 100 million or more
- 627 are Australian resident private companies with revenue of $200 million or more.
The ATO notes in its report that “the data in the report is taken directly from tax returns and does not reflect any intervention or compliance work after the returns have been lodged.”
The agency said the percentage of these entities paying no income tax had decreased since the ATO report was first published, from 36 per cent in 2013-14 to 31 per cent in 2021-22.
“The fact that an entity does not pay income tax does not necessarily mean that it is not meeting its obligations,” Ms. Saint said.
“Tax is paid on profits and not on gross income. Even entities with significant income streams may not make a profit for various reasons.
“There are legitimate reasons why a business may not pay income tax, for example it may not have made a profit for the year or be in the start-up phase of its business.”
The ATO also estimates what it calls a tax gap – that is, the estimated difference between what the agency expects to collect and the amount that would have been collected if every taxpayer had fully complied to the law – and claims that it is very weak.
“The net tax gap for large corporate groups is around 4.2 per cent, or $3 billion in 2020-21,” the agency said.
The total oil resource rent tax payable exceeds the increase in the price of oil
There are 11 entities in the 2021-22 PRRT Transparency Population, with a total Petroleum Resource Rent Tax (PRRT) payable of almost $2 billion.
The number of entities paying PRRT increased from 10 the previous year, and PRRT payable increased from $926 million.
The report states that “the increase in PRRT payable reflects the increased profitability of businesses subject to PRRT in 2021-22, with oil prices being a key factor”.
“The results must also be interpreted in light of developments in the global energy market,” the ATO warned.
“For example, the 2020-21 result reflects the recovery in energy prices after a 2020 contraction, particularly for oil. The 2021-22 result is mainly attributed to the reaction of energy prices to volatility market created by the Russian invasion of Ukraine.”
The ATO report currently includes Australian public and foreign corporate tax entities with total income of $100 million or more, Australian resident private companies with total income of $200 million or more and entities that must pay tax on oil resource rent.
But recent changes to the law will require resident Australian private companies with income of $100 million or more to report from 2024, meaning there will be a significant increase in the number of private entities included in the report expected in the coming years.