Corporate Australia paid almost $100 billion in income tax in 2022/23, an increase of nearly 17 per cent on the previous year – but almost a third of businesses avoided a tax bill.
Australian Taxation Office commissioner Chris Jordan. Photo: AAP
The record level of receipts is revealed in the Australian Taxation Office’s tenth annual Corporate Tax Transparency (CTT) report.
Despite the rise in tax collected from Australia’s biggest corporations, data showed that 1253 entities from a total of 3985 businesses did not pay tax, although this was a reduction of five per cent since the first CTT report in 2013-14.
Of the 31 per cent that did not pay tax, 14 per cent incurred an accounting loss, seven per cent incurred a tax loss, two per cent utilised offsets and eight per cent used tax losses from prior year.
ATO Deputy Commissioner Rebecca Saint said there were “legitimate reasons” why a company may pay no income tax.
“The Australian community can be assured we pay close attention to those who pay no income tax to ensure that they are not trying to game the system,’ she said.
She hailed the total income tax figure of $97.9 billion as a “great result” and said tax paid in 2022-23 was the highest since CTT reporting started.
Most sectors of the economy paid more tax than the previous year and the oil and gas sector contributed $11.6 billion, driven by a combination of commodity prices, the project production life cycle and ATO intervention.
For the second year in a row, the mining sector paid more tax than all other sectors combined, paying more than five times than they did in 2014-15.
Saint said after ATO compliance measures, large corporates paid 96 per cent of the income tax they should have for 2021-22.
“As they should be, large corporate groups are amongst the highest in net tax performance of all population segments,” she said.
The federal government seized on the result as evidence of its efforts to bolster ATO compliance operations, including $200 million in increased funding for the Tax Avoidance Taskforce.
Financial Services Minister Stephen Jones says the increase in tax collected vindicated the work of the government and ATO to claw back money owed by some of Australia’s biggest companies.
“The ATO’s work is crucial in the fight to hold big companies to account. Our government will always ensure it has the resources necessary to retrieve what is owed so we can fund services the community needs,” he said.
Jones says the Tax Avoidance Taskforce has led a crackdown on tax dodging by multinational enterprises, large Australian public and private groups and wealthy individuals.
Since the taskforce was formed in 2016, it has helped secure more than $33.2 billion in additional tax revenue from multinational enterprises, large public and private businesses.
More big corporates paying their fair share of tax means more funding for essential services for Australians like healthcare, infrastructure, and education, the minister said.
“Australia is leading the way on corporate and multinational tax transparency to drive lasting behavioural change,” Assistant Minister for Treasury Andrew Leigh said.
Jones said in 2022 the federal government was chasing an overall yearly shortfall of more than $33 billion in unpaid tax.
– AAP
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Consulting firms working for the Defence Department, the National Disability Insurance Scheme and the Australian Taxation Office will be hardest hit by a new plan to strip more than $500 million in work from the embattled advisory sector this financial year.
The revelation is contained in a new report that details, for the first time, the value of work considered core to the public service that is done by external parties and will be brought back in-house to government departments and agencies. Core work includes activities such as developing policy and drafting laws and regulation.
Defence accounted for more than 75 per cent of the $527 million in external work targeted for the chop. The department has identified more than $300 million in work to be moved in-house, the NDIS has earmarked $68 million worth of work and the ATO plans to bring back activity worth $32 million.
The more than half a billion in targeted work outlined in the report is a fresh blow to the public sector consulting arms of advisory giants such as Deloitte, EY and KPMG, and comes on top of Commonwealth spending with these firms falling to its lowest level in five years in 2023-24.
The government estimates it has saved $4 billion by cutting Commonwealth spending on consultants and other external workers.
Building up the public service
The shift away from outsourcing core public sector work is part of a push by the Albanese government to build public service skills after a decade of increasing reliance on contractors and consultants.
“Core work includes developing cabinet submissions, drafting legislation and regulation, and leading policy formulation,” Public Service Minister Katy Gallagher said.
“It also stops the use of contractors as a member of agency executive teams as we saw under the Coalition.”
The push to reduce the use of consultants gained urgency following the integrity concerns raised by the PwC tax leaks scandal.
The scandal involved a former tax partner sharing with other partners confidential details about tax laws he was helping the Treasury design, to help the firm win new clients.
The partners involved also separately developed structures to sidestep the same tax laws.
The government has already set up an in-house consulting unit and Defence will create a similar body to bolster its advisory skills and reduce the use of consultants. Departments and agencies have also been ordered to allocate a larger share of advisory work to smaller firms.
The $500 million figure is not a final savings figure as the bodies are likely to have higher employee costs as core work is brought back in-house.
There is still an acceptance that consultants and contractors are useful when specialist knowledge or an independent assessment is required by Commonwealth entities.
In the same way, labour hire is useful for situations where a temporary workforce is required to deal with a surge in activity.
In addition, the move to bring work in-house may not be done this financial year in entities such as Defence due to the sheer size of the work that is outsourced.
Making entities define core work was part of the major tightening of labour outsourcing. The new policy makes departmental and agency heads accountable for prioritising direct employment and ensuring any use of external expertise enhances the work and knowledge of the public service.
Accounting, policy work outsourced
Agencies reported that the most common type of core work done by contractors and consultants were accounting and finance-related work, policy development and legal-related work.
About two-thirds of agencies said that while IT-related work was core, it was “difficult to bring in-house”.
Despite this difficulty – due to skill shortages and the higher pay offered in the private sector – almost $50 million in IT-related work is due to be brought in-house by departments and agencies.
While Coalition governments argued that outsourcing lowered the cost of the public service, inquiries found that the use of contractors and consultants was not tracked properly and that over time the practice led to public servants losing skills and becoming more reliant on external parties.
To illustrate the rapid drop in demand in the public sector advisory market, the value of federal government work done by the big four consulting firms has crashed to just $607 million in new deals in 2023-24 from a peak of $1.2 billion in 2021-22, excluding extensions.
The net effect has been a proliferation of smaller firms setting up and increasing the size of their offices in Canberra even as the largest firms cut partners and staff.
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