Big companies entrusted with own tax auditing

Large mining companies may avoid public scrutiny over their taxes if the Abbott government complies with calls for amendments to tax law.

The Australian Tax Office (ATO) is working towards a plan which will see 56 companies with a turnover of $100 million or more allowed to perform their own tax auditing, SMH reported.

The proposal has been met with widespread anger and criticism from government officials, unions and the public, however the ATO said feedback from taxpayers and industry was positive.

The system is called External Compliance Assurance Process (ECAP), which was proposed as a means to reduce costs after budget cuts by the Abbott government.

Under ECAP, large accounting firms will be able to perform audits on large companies, in a move that ATO staff said would be like “giving the keys to the vault to the thieves”.

The results of ECAP audits would not be publically accessible.

3000 ATO staff were sacked as a result of cuts by the Abbott government, and a further 1700 are expected to go by 2018.

Following the release of the Tax Justice Network report, an inquiry into tax avoidance and tax minimisation strategies has heard from a number of Australia’s top companies who are defending the amount of tax they pay.

The report suggested that of the ASX200 around 29 per cent had an effective e tax rate of 10 per cent or less, and 14 per cent of the companies had an effective tax rate of zero.

Glencore has said the Tax Justice Network report was not “reliable” or credible” and that they paid their fair share in taxes and royalties.

Last year Glencore were accused by the Sydney Morning Herald of failing to pay taxes for three years, in an article which was corrected to state that Glencore paid more than $400 million in the same period.

Rio Tinto said it has signed a compliance agreement with the Australian Tax Office which ascertains how much tax it has to pay, ahead of time.

Rio has requested an extension to the agreement for two years.

Woodside claimed it had an effective tax rate of 29.77 per cent, and also has a compliance agreement.

A report on the ECAP program will be released in March to determine if it will become permanent. 

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