Corporate tax increased by 20% between 2015-16 and 2016-17, rising $7.5bn to $45.7bn, driven by surging commodity prices

This article is more than 1 year old

This article is more than 1 year old

Ten companies are paying 45% of all corporate tax in Australia, demonstrating how reliant the federal government is on the fortunes of the big banks, miners and supermarket giants.

The tax office has released its fourth tax transparency report, revealing key details of 2,109 of the largest companies with operations in Australia for the 2016-17 financial year.

Corporate tax increased by 20% between 2015-16 and 2016-17, rising $7.5bn to $45.7bn, driven by surging commodity prices.

The big four banks (Commonwealth Bank, Westpac, NAB, and ANZ), two biggest miners (BHP Billiton, Rio Tinto), two supermarket giants (Wesfarmers, Woolworths), and Telstra and AMP Limited paid a combined $20.8bn in corporate tax in 2016-17 – representing 45% of all corporate tax paid in Australia.

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But the report has kicked off another debate about tax transparency and avoidance.

The data shows 722 of the largest corporations paid no corporate tax in Australia in 2016-17, including 100 firms that reported more than $1bn in total income.

Civil society groups say it is a clear sign the tax system needs an overhaul. Oxfam Australia has pointed out that 281 companies, including Adani for its Abbot Point Terminal and ExxonMobil Australia, have not paid a cent of corporate tax since 2014-15.

However, the tax office says the tax compliance rate among Australia’s largest companies has been improving, and it is now roughly 95%, and companies that undertake aggressive tax planning are being closely monitored.

It says sensitivity to economic conditions, reinvestment into the business, distribution of profits to other entities within the broader group, tax deductions and tax offsets can all affect the amount of taxable income and tax payable in a single year.

For instance, 251 entities reported a taxable income in 2016-17 but prior-year losses were available to deduct against that profit, so no tax was payable.

But the Greens have pointed out at least eight of the largest companies paid more money in donations to the Labor and Liberal and National parties in 2016-17 than they paid in corporate tax that year.

Chevron paid $82,228 in political donations in 2016-17, Origin Energy $103,574, Woodside Petroleum $279,000, Whitehaven Coal $30,000, and Santos $102,516, but none of them paid corporate tax that year.

“Political donors paying zero tax justifiably erodes public confidence in our democracy,” Greens senator Larissa Waters said.

To coincide with the tax transparency report, the ATO has also released its second large corporate group income “tax gap report”. The data refers to the 2015-16 year.

The report catalogues the difference between the total amount of corporate tax collected from large corporate groups and the amount the ATO estimates would be collected if every large taxpayer was fully compliant.

The report defines a large corporate group as one with gross income of more than $250m in a given income year.

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In 2015–16, large corporate groups reported $1.7 trillion in gross income and paid approximately $40bn in tax.

The ATO estimates the net income “tax gap” for that year was $1.8bn, or 4.4% of tax payable for this group. It says the tax gap primarily reflects differences in the interpretation of complex areas of tax law.

The ATO says the tax gap has fallen from 6.5% in 2009-10 to 4.4% in 2015-16.

“We understand the tax compliance of large corporate groups influences the confidence other taxpayers have in the fairness and integrity of our tax system,” the ATO said. “By actively managing the key compliance risks that drive the tax gap, we seek to sustainably reduce that gap.”

The ATO has also released its first report on the “tax gap” of the petroleum resource rent tax (PRRT) regime.

The PRRT – a tax on profits generated from the sale of oil and gas products – has been the subject of controversy in recent years.

Critics have claimed Australia is giving away its natural resources far too cheaply, with countries such as Qatar receiving billions of dollars in royalty payments for its natural gas exports while Australia only gets $800m in PRRT payments for similar quantities of gas.

However, the ATO says the PRRT “tax gap” – an estimate of the difference between the amount of PRRT payable under the law and the amount actually collected by the ATO – is miniscule.

It says PRRT collected in 2013–14 was $1.8b and the tax gap was just $39m , or 2.1%.

In 2014–15, the PRRT was $1.2b and the tax gap was only $31m, or 2.5%. And in 2015–16, the PRRT was $845m, and the tax gap was just $18m, or 2%.

The ATO says it is not making a comment about the legitimacy of the way the PRRT is calculated. It is only saying that under the current law the theoretical tax gap is quite small.