Tax initiatives, reforms and policies related to tax disclosures and significant global entities | panel discussion

ROMAN:  Okay. Thank you all for coming. I just want to read out the acknowledgment of the country. UTS Business School respectfully acknowledges that we are located on the land of the Gadigal people of the Eora Nation. The Gadigal people have cared for the community and land and Waters for thousands of generations based on their deep knowledge of their country. We pay our respects to their ancestors, their elders, and acknowledge their ongoing status as the first peoples of this land, thank you. Today is the inaugural UTS Accounting Discipline Group Webinar, so again thank you for coming. It's I think very very timely with the budget coming up in a few weeks and we will mainly discuss the corporate tax policy initiatives that sort of promised last year as part of the election and we'll be looking at what's happened since and I suspect a lot of these measures will be part of the budget in a few weeks, so we'll take it from there. Our panel members for today I am the host uh my name is Roman, we also have Jason whom I've known for quite a long time, for I'd say probably over 10 years at least, and we have worked with on many different projects and Jason is a private consultant who deals in corporate tax avoidance issues, has done many submissions, done a lot of his own research as well and for someone who didn't know much about accounting 10, 15 years ago he probably knows more than certain accountants. We also have Jason who is on Zoom, we we also have Ross who's next to me there, my former PhD student and he's done a lot of research in the area, he's also worked with me on many different projects and with Jason so you know it's quite a bit about the area especially the PRRT which he will hopefully talk about today. And finally we have Bronwyn McCready. She's also an academic from QUT who has a a big interest in the area of tax and tax avoidance and has written some things recently and I presume will continue to do so, she is also starting a special interest group as part of the AFAANZ conference or Association - which is the Australian and New Zealand Accounting and Finance Association - so thank you Bronwyn. All right, so I think the format will be - and we have Sue as well thank you Sue, she's our Head of Discipline - before I do start on the discussion, again as I said this is our inaugural webinar, hopefully first of many the point of these basically is for the ADG - or the Accounting Discipline Group - to engage with with the community, that is everyone out there in terms of research topics, any topics of interest to the community and to really, you know, get some dialogue going between us and the community. To start any interesting projects, any of you guys out there, you know, we do have ideas for webinars we're happy, you know, please contact me. We do have plans to put on at least another three to five webinars by the end of the year, so please stay tuned or just just have a look on our website they will be advertised as soon as we we have more concrete plans, but really the aim again as I said is to engage with the community that is you guys out there and and you know hopefully begin some sort of collaborations as well, but that's, you know, external engagement is part of our service which I think a lot of people in the community are not actually aware of, that's part of our job, and we'd love to discuss any sort of you know topical issues that of concern to the community at large. I don't know, Sue did you want to add something about what our engagement objectives are as the Head of School? you don't have to, but I don't know I presume I've said enough.

No? Okay. All right, well let's begin so the the aim of today as as we advertised is to basically discuss - and it's a very timely webinar I think with the budget as I said coming up in a few weeks - is to discuss some of the corporate tax, corporate tax avoidance policy and I think this is going to be a very exciting year because there's a lot of things in the pipe work for the government, and exciting as well because the panel members - in particular myself, Jason, Ross and Bronwyn - we've been advocating for these things I think for at least a decade, have been working on these things, Jason on submissions and us together on various industry research projects. We've done, we've gone, to the Senate hearings and provided evidence at those hearings so it's great to see that some of this stuff is actually hopefully coming to fruition. Last year labor as part of their Multinational Tax Integrity Package - just before the election - released a few things. It was a bit vague there before the election, as I think a lot of things are, but I think they they provide a lot more detail on what they were trying to do in the October budget last year and in fact I think what's happening now is probably before the budget and I think these things are timely. Treasury is actually releasing the draft legislation and some during the consultation time, and look I suspect maybe hopefully a lot of these things will be actually costed and will be in the budget as well in May, in a few weeks, so I think it's a very very timely discussion and I think, you know, it's good for us to have it at this stage. What I'll do is I will ask a couple of questions of our panel members. They can, you know, if possible, let's just give them five, ten minutes to talk about these these issues and I'm happy to open it up to the audience if you guys have any questions of them. Obviously if there is time in the end as well you can ask you us whatever you like. But what I might do, is the first question I'll put forward is to Jason Ward - as I said we have worked with Jason many many years - and Jason is probably the most active out of the panel because Jason actually does this pretty much for a living together with the tax Justice Network through his own Consulting firm - there he's got it there in the background - he puts in submissions, on a consistent basis meets with the ATO, with a lot of other stakeholders, NGOs, so on and so forth, so he is probably one of the most knowledgeable, I'd say, people in Australia in terms of, you know, what what corporate tax policy initiatives are in play, what's likely to, to you know, to actually, you know, be put forward by the government and actually make it finally into legislation. So, Jason how about, if you can, if you don't mind, just summarize for us, you know, some of the initiatives during the election and how they took, you know, they were solidified with a budget last year in October, what's been happening and what's actually now on, literally almost on, the books with the draft legislation there.

So I'll pass it over to you, I'll give you five to ten minutes to say it, and then obviously anyone who's got questions, it's pretty much an open meeting so anyone who's got questions for you they can ask you after that. Thanks Jason.

JASON: Sure, thank you Roman, and just to clarify so my organization is CICTAR, the Centre for International Corporate Tax Accountability and Research. We don't do Consulting, but we're now officially registered in the UK as a company limited by guarantee - a non-profit organization - and we do a lot of work with partners in Australia, and all around the world. We do a lot of work with trade unions, we try to bring trade unions into the push for tax reform at the national and global levels. So I'm very excited about what has transpired, and as Roman indicated, this sort of flows from election promises, flows from October's budget last year and then flows from a Treasury consultation that was put out last year in, I think, October/September. So at the moment we've had four pieces of draft legislation that Treasury has published and the consultation period for the last of those four ends on Friday. So we've got four pieces of draft legislation that are out there now, so they are, I'll go in reverse order, Public Country-By-Country Reporting is the one that closes on Friday - and the most recent one - and then the one that I I think has the most potential, and sets a new global standard, it may not have immediate revenue consequences in Australia, but it is globally significant and I can come back to that. The other one which I think the submission may have just closed is, relates to, Deductions for Royalties or Intangibles - a frequent tool used by companies to reduce their tax liabilities in Australia and in other countries around the world. So there's a new legislation that will restrict the use of payments - related party payments - for royalties or intangibles to jurisdictions, or places with a low effective tax rate, so we're quite excited about that one. There's some tinkering around fin cap, or related party offshore related party debt, as well, so that's just kind of tightening the existing rules that are I think already pretty good since the Chevron decision in 2017, which put new practical compliance guidelines in place for that.

And the fourth piece requires all Australian public companies to disclose all of their subsidiaries and the jurisdictions in which those subsidiaries are tax residents, or Incorporated. So that is a significant step forward, applying only to Australian public companies, listed and non-listed, that kind of matches the standard that exists in the UK, so we're very happy to see that as a simple commonsense reform coming into place. There's a fourth piece which I'll just touch on, which is not part of this package, which there's been some noise about in recent days, which I'm quite excited about, which is continuing reforms to the petroleum resource rent tax. Long long overdue and stalled in a Treasury consultation for about three years and that's following the Callaghan PRRT review which Treasurer Scott Morrison kicked off in 2016. So those reforms are a very long time coming and that I think that most promising there is a simple commonsense reform relating to the gas transfer pricing mechanism - or how the gas, the raw gas is priced within the PRRT system. At the time of the Callaghan review in 2016 that was estimated to to increased revenues by about 90 billion over a decade. I think more current estimates are are suggesting that in the short term we're looking at 3 billion dollars of revenue per year from the offshore oil gas industry, which currently pays nothing in terms of royalties for the gas that it extracts, and that has made Australia the world's largest exporter of LNG liquefied natural gas, so very excited about that. I'm just going to come back very briefly if I can to the public country-by-country reporting. Multinationals in Australia and around the world have been reporting for a number of years under the OECD rules but that reporting is confidential and restricted to tax authorities only. This is the first time anywhere in the world that we'll have a government requiring public country-by-country reporting and it's following the GRI tax standard - the Global Reporting Initiative tax standard - which was developed by an expert panel and widely consulted in 2019. You know my organization, with allies, helps to get Global Investors with 10 trillion dollars in assets under management to demand
that that be part of the GRI tax standard public country-by-country reporting. It's a bit more robust than the OECD standard and designed for public consumption, so this is a huge increase in transparency and is relevant globally because anybody anywhere in the world, particularly you know tax authorities in the Global South that don't have access to the OECD information will be able to look at how much multinationals pay - so long as they operate in Australia - how much they pay, or don't pay, in every country in the world in which they operate and other basic financial information will be required as well, the number of workers and various descriptions of, you know, profits/losses and related party transactions. And we've had a lot of investor activity around this issue, demanding greater transparency, because at the moment investors in a company, say an Amazon or Microsoft, are completely in the dark as to what its operations are and how it functions, both on a tax basis and a broader economic basis, in countries outside of the United States because they report on the U.S as one and the rest of the world generally as a lump sum, so this will force them to disaggregate information, basic financial information, tax revenue, profits/losses numbers of workers et cetera, on a country-by-country basis. So we finally, I agree with some of the world's largest corporate lobbyists for the I.T. industry who are now saying that what we need is global consistency, and I couldn't agree more and hoping that other jurisdictions will immediately follow Australia's example and use the GRI tax standard as the means for requiring public country-by-country reporting for all multinationals. I'll stop rambling right there.

ROMAN: Thank you Jason, but I'll disagree with you on one thing. I think the measures you mentioned you could probably put them into two baskets, and we sort of knew that during the election promises, we didn't know exactly but they are transparency measures on the one hand, and actual changes to tax rules. So where I disagree with you is those transparency measures, they will have, they will have, revenue implications. It's hard to quantify but that's the whole point because as you know we've done research which suggests transparency could probably work even better than rule changes, or specific rule changes, in making corporates actually pay more tax, or or do less tax avoidance. So what I might do guys is, I might just pass on straight to Bronwyn because she she will have to leave at six o'clock, the reason being maybe we can come back to Jason a bit later, because Jason does have a lot of stories, but what I'm going to do now is I'm going to ask Bronwyn and then Ross a couple of questions specifically in relation to to these measures that Jason has mentioned. So Bronwyn, I think Jason has given us a very plain-English sort of view of country-by-country - or the public version of it that hopefully will have in Australia - and there are, there are sort of public versions of it in Europe, but can you give us a bit more of a, well maybe a bit more of a, technical and a more of an academic overview of what it is, why we need it, and possibly, you know, where it can bring in more revenues et cetera.

BRONWYN: Okay, can everyone hear me? and... I'm fine? Great, excellent, okay. So thank you very much for the invitation to come along today and talk to you about this. In terms of tax policy, and particular tax policy in Australia, we've taken one of a global approach in recent years, with jurisdictions debating significant changes to international tax rules affecting multinational companies. So, for example, we had the OECD BEPS program and more recently we've been talking about pillar one and pillar two. Now Australia is a significant contributor to the work of the OECD, and it arguably maintains its data service as a leader of tax policy through domestic policy initiatives, such as the ones that Jason's just been speaking about. So as we know in the 2022-23 budget the Australian government took strides towards one of their election commitments and proposed the Multinational Tax Integrity Package, associated with improved tax transparency. Now that sought to impose, amongst other things, public country-by-country reporting on multinational entities. Now this proposal has now been operationalised in a recent exposure draft, which was named the Taxation Laws Amendment (Measures for Future Bills) Bill of 2023, and it was issued on the 5th of April 2023, and it is due to close for consultation as Jason said on this Friday the 28th of the 4th. So it is landmark legislation, it has been touted as a world first in corporate tax transparency, and it's been applauded worldwide by transparency advocates as a call to action for other jurisdictions, so the Tax Justice Network, CICTAR, and the Fact Coalition among others. So what does the legislation in fact call for? So specifically public country-by-country reporting will require Australian resident constitutional corporations, which are financial or trading corporations formed in Australia, or you know a foreign corporation, what we also call country-by-country reporting parents and subsidiaries, to report key financial information for every jurisdiction that they operate in. Including the names of each entity in the country-by-country reporting group, a description of the country-by-country reporting group's approach to tax, a description of their main business activities, the number of employees that they have at the end of the year, revenue related to unrelated parties or revenue from unrelated parties, revenue from related parties, expenses arising from transactions with related parties, profit and loss before income tax, and they have to provide a list of tangible and intangible assets at the end of the financial year, and the book value of those assets. They have to include income tax paid, income tax accrued, and effective tax rate - which I'm not completely sure is the right approach which I'll allude to in a minute - and a reason for any difference between income tax accrued and the amount of income tax due, and finally the currency they're using to calculate all of this information.

So obviously this is a huge step towards lifting the corporate veil and addressing multinational tax avoidance, but the question still remains "Does it go far enough?" so in research that I've completed with two colleagues, Professor Kerrie Saqiq and Professor Rick Krever, on the Tax Transparency Code - which is a voluntary disclosure regime in Australia - greater transparency does not always equal better information. So what I'm saying by that is, more information does not always equal relevant robust verifiable and comparable information, and we certainly can't assume that the provision of this additional information is going to make a significant difference to the behavior - or the tax behavior - of companies. Importantly the issue that still remains in country-by-country reporting is that the information provided does not go deep enough, so it's not detailed enough. For example, if we're trying to identify corporate tax avoidance or tax aggressive behavior the figures that will be published in country-by-country reporting - so things like revenue, expenses, profits and losses - are net of tax aggressive behaviors, which are typically wrangled or perpetrated through transfer pricing, loan agreements, or an impressive suite of other methods, or other arrangements. Now the effects of these transactions are already embedded or hidden in the figures, so in profits and losses, in revenues and expenses, so we won't be able to determine with accuracy the occurrence and the extent of these transactions. Of course we can try, as we have been trying to date by formulating proxies, but recent work that I've done on conduct, on looking at these proxies measures of tax aggressiveness reveal that they have limitations.

Now in that study we calculated 16 common proxies of corporate tax aggression for the ASX200, and then we ranked the 200 companies based upon their level of aggression - so from most aggressive to least aggressive. We then extracted the top 10 most aggressive and the bottom 10 least aggressive companies for comparison. Now not one company was classified as a top 10 tax aggressive company across all 16 proxies. The best that we got was 7, so one company was deemed to be tax aggressive across 7 proxies, and in fact most companies, or some of the companies, were both listed in both top 10 as being the most aggressive and bottom 10 as the least aggressive. So it demonstrated the fallibility of those proxies and the fact that we're not measuring with accuracy corporate tax aggression, and obviously highlighting the need for the amount of work that still needs to be done in this space. On the bright side however public country-by-country reporting is an important and hard-fought step towards complete corporate tax transparency. It will provide more information, and I'll be very interested to see the depth and quality of the information that's provided.

ROMAN: Any questions? I've got a small question for Bronwyn, but anyone else?

ROMAN: so okay, Bronwyn just very quickly, looking at the legislation, so I presume it's stated, it'll be apparent that does country-by-country, so I presume that's an Australian multinational, and the member of a country-by-country group, and I presume that refers to subsidiary of a multinational operating in Australia?

BRONWYN: Correct.

ROMAN: So are we going to get that information for Australian multinationals and for the subsidiaries of those foreign multinationals operating in Australia, but then what are we going to get for those, for the 'Microsofts' and the 'Googles'? Are we going to get the country-by-country as reported by the parent company in the U.S.? Is that...

BRONWYN: What is legislated is that Australian resident constitutional corporation, so basically corporations that have either a 'limited' or a 'proprietary limited' tag to it, has to provide country-by-country reporting. So if Microsoft, Amazon, whoever, has a constitutional corporation registered in Australia, they are going to have to provide country-by-country reporting, which means information on the parent and all of the members of the group that sit underneath that.

ROMAN: So I presume it'll be information that the parent provides country-by-country in the U.S.?

BRONWYN: That's our hope.

ROMAN: Yeah, as opposed to just a subsidiary here from its perspective?

BRONWYN: Correct, and that is our hope and that's what Jason was saying before. That this is landmark legislation, in that we'll be getting, even though it's not regulated in the U.S., because we have an operation in Australia we're going to get access to the information from those U.S. based companies.

ROMAN: That will be interesting I guess.

BRONWYN: Yeah, I can't wait, like for someone who loves data, I am just 'frothing at the bit' to get a hold of it!

ROMAN: But I think there'll be a lot of surprises, and we won't know exactly what it looks like until until we see it. I think Mattia you had a question for Bronwyn as well?

MATTIA: Yeah, Bronwyn, if you could articulate what's your concern with the ETR because I know that we have heard about Jason and yeah Roman. Just a bit of a background, I've worked on that for a long time and I just want to understand your concern versus what I know their concerns were when they were working with those.

BRONWYN: Okay, so in terms of an effective tax rate ,the calculation of that is after all tax avoidance practices have taken place, right? So, how can you tell? How can you tell that a company is aggressive based on their ETR? They may have a low, so if we go back to basics, a low ETR means that a company's tax aggressive, and a high ETR means that they're a good taxpayer, but it doesn't necessarily mean that. A low ETR might mean that you've haven't been very profitable this period, that you have offset a whole heap of losses from prior periods and therefore your ETR is low, and so it really doesn't measure tax aggressiveness. We have to, to be able to measure with accuracy tax aggressiveness, we need to be able to highlight these transfer pricing or these activities. So we need something, a measure that occurs prior to all these transfer pricing fin cap, BEX activities and until we have that we really can't determine that effective tax rates in themselves identify corporate tax aggression. I mean ultimately it's the best thing we've got, at, now. Like it is a proxy, it's an estimation but it's certainly not... it's infallible.

ROMAN: I can add a little bit, and I've got a PhD student, he's got a paper and hopefully it's one we'll present at SIG in AFAANZ, and I'll send that to you by the end of May. We've discussed that Bronwyn, but Bronwyn's correct ETR, it does measure tax aggressiveness but with error, because it contains a lot of accrual items which have nothing whatsoever, to us accountants would know it has nothing to do with tax aggressiveness. There are items there that do, and that's what we're kind of working on at the moment, is coming up with a modified ETR measure - and again we have a paper and hopefully we will present it at AFAANZ in July - but yes, at the end of the day I think what Bronwyn's trying to say, tax aggressiveness, we have theoretical definitions, but essentially it's unobservable, you know what I mean? So you can't directly observe it, that's why we use a lot of proxies, and measuring things like transfer pricing is obviously very very difficult - we don't have access to that data - and yes ETR therefore is the best. And interestingly, you know, the minimum Global Tax thing - which was supposed to have already happened but it hasn't for various reasons - they're going to have ETR as their main proxy for it all, you know what I mean? Which would have been obviously problematic and will be if it ever comes into being, but yes ETR is not perfect but we are working on it - yes uh questions - we have a couple of questions in chat sorry I'll just have a look. If shareholders want further financial information they can vote for it. Notably when these measures got put to a vote at Amazon, Microsoft AGM less than - would you know anything about that? Because Jason had a lot to do with the Amazon stuff, so the question is I guess, if shareholders want additional tax information from the board they can ask for it, but it's not that simple, I guess you'd need the majority. So can you talk a little bit more about it? Because Jason's actually, he doesn't just do work with Australian corporate tax - and obviously we can all tell from the accent he's American - so he's done a lot of work with corporate tax and avoidance in the U.S.. Can you tell us more about that perhaps? How to get things through through AGMs with respect to tax matters in the U.S.?

JASON: Sure. We filed a landmark resolution at Amazon, which the company challenged and tried to get the U.S. Securities and Exchange Commission to throw out, and we had the Securities and Exchange Commission - with backing from investors with 3.6 trillion dollars in capital - supporting our effort to get that voted on by shareholders. So the SEC - for the first time ever - backed a shareholder resolution around tax issues. So that's... previously they had been tossed out and we changed the opinion of the Securities and Exchange Commission to allow that tax resolution to go forward despite Amazon's best efforts to have it thrown out as "ordinary business". So we did get -

ROMAN: so the person in chat has given examples that it doesn't require necessarily a 50%. I think removing Bezos wasn't 50%. So, are we aware of anything in the U.S. where shareholders actually want more tax information to judge whether I mean-

JASON: It was a remarkable result so, I can't remember we did, we've done Amazon followed by Microsoft and Cisco, and we reached 27% of shareholders voting in favor of this resolution. As a first-time resolution that is remarkable. That shows a growing groundswell of support amongst shareholders and investors to have that data.

ROMAN: Exactly, was that enough to get something done?

JASON: Well no, it's not enough to mandate the company to change its behavior, but it shows increasing support, and we'll see, there'll be resolutions this year. Again, at Amazon and resolutions have also been filed at Chevron, Exxon and Conoco Phillips and there'll be a few more that we'll see as well. So we'll, you know, shareholders get... take time to understand a resolution and there's a growing awareness of this issue as important to shareholders in Europe, and that awareness is now spreading into North America as well. So I think we're going to see ever increasing shareholder support for these resolutions. How can you be a shareholder in a company like Amazon and not have informations on which country it's actually making money in revenues, losses et cetera? It's not just the tax issue, it's about understanding a company's business strategy, and whether that business strategy is based on gaining the tax system or whether it's based on innovation and, you know, creating new models and new products and new services that consumers want.

ROMAN: Thanks Jason. Bronwyn I know you've got to leave. I was gonna put another question about intangibles but we may not have-

BRONWYN: I can quickly address it, but I've got to start teaching at 6.

ROMAN: okay, we'll give it a few minutes and then I might add stuff, so may Ross and Jason. And Seb has a question, so Seb if you don't mind, let Bronwyn just add a bit about intangibles because she has to leave and then we'll go back to Seb with a question. Thanks Bronwyn.

BRONWYN: My pleasure. So in terms of the developments in tangibles in the tax space, it was obviously flagged in the 2022-23 budget, in that proposed Multinational Tax Integrity Package, and in that package it proposed a new rule limiting multinational entities ability to claim tax deductions for payments relating to intangibles and royalties and that ultimately- that if they ultimately lead to insufficient tax paid or tax minimization. So this proposed rule was deemed to be consistent with actions taken by other jurisdictions to address base erosion and profit shifting relating to intangibles and royalties. Now on the 31st of March of this year the Australian treasury introduced the exposure draft for the Treasury's Laws Amendment (Measures for Consultation) Bill with relation to deductions for payments relating to intangible assets connected with low corporate tax jurisdictions. So that exposure draft specifically talks about new legislation that's- will be introduced via an anti-avoidance rule. So where tax deductions for payments that significant global entities make to their associates - whether directly or indirectly - in relation to exploiting intangible assets connected with a low tax jurisdiction their deduction will be denied. So the meaning of 'exploit' set out in the exposure draft in Section 9, includes using the intangible asset, marketing, selling, licensing or distributing the intangible asset, supply receipt or forbearance in respect of that asset, exploiting another intangible asset or basically doing anything else in respect of the intangible asset. In terms of a foreign country that's in a low corporate tax jurisdiction, it's going to be - well it is defined as - a country that has a corporate income tax rate less than 15% - or 0 - or if the foreign country is determined under Subsection 3 to provide a preferential patent box regime, without significant economic substance. So the anti- that anti-avoidance rule is expected to apply to relevant payments made on and after the 1st of July 2023 and it- the consultation period for that exposure draft closes on Friday as well, so rush to get those submissions in.

ROMAN: Thank you Bronwyn

BRONWYN: Thank you very much for having me at the webinar. If there are any questions. please feel free to email me or contact me at QUT or through Roman. I'm more than happy to talk to anybody about this, it is a passion of mine, but now I have to go and teach some undergrad students so I wish you the very best and thank you very much for having me.

ROMAN: Thanks Bronwyn. Okay sorry, Seb, you had a question?

SEB: No, that's perfectly fine, thank you. I hope you can hear me? So I had two questions. So first question was on the... maybe one for you Jason. Like, what level of pushback do you anticipate in Australia? I know you said that, probably companies will turn into advocates for public CBC elsewhere - that makes sense - but I was wondering if before that happens, will they have scope to dilute the public CBCR in Australia? And, yes, so that was my my first question. My second question was more of a comment, so I work for the PRI - so Principles for Responsible Investment - and we're trying to help investors integrate tax into their investment decisions, and the number one 'red flag' I would say that investors have been using so far is the effective tax rate. And so I'm hearing, I'm increasingly hearing, and including from Bronwyn today, that it might not be the best proxy to use, so yeah, I'd be curious to know like, what proxies can investors use? And especially the one thing to bear in mind with investors is that they don't have a lot of time, and they've got 10 other ESG issues that unfortunately take precedence over tax, like climate for example, so I don't know what the answer is to that, so that's more of a comment.

ROMAN: Thanks Seb. So Jason, I might get you to answer Seb about what you think the eventual outcome will be, and what pressure, you know, what lobbying they'll be from the corporates about public country-by-country, and I'm happy to answer Seb again with respect to ETRs, because as I said, it's kind of, you know, our big research area at the moment. But yes, Jason you want to address the- Jason's been putting submissions for many many years about country-by-country, so-

JASON: Yep, and one of the things that we've continually asked for is to make it a condition of public contracts as well, prior to this being mandated for all multinationals, so we think that's a much better solution but, you know, governments should - and could - require compliance with GRI for receiving government contracts as well. So I am relatively confident that the legislation will move forward, hopefully as is and perhaps with a few tweaks to sort of clarify and strengthen it, you know, so one of the things we've asked for in our submission is to make sure that it's in a machine readable format, so that it's easy to analyze , and over a few years this will be an incredible data source to analyze company behavior for anyone anywhere in the world. I think one year of data might not tell you a whole lot, but three years of data - and more - will tell you a whole lot. I did attend a tax roundtable hosted by Treasury a few weeks back and most of the room was representatives from industry representatives, representing business and accounting firms and others, and I was pleasantly surprised by the relative lack of pushback in that audience. I think that most people have basically accepted that greater transparency is coming, and I think that Australia has done this, you know, following the GRI tax standard in a way that makes a lot of sense. So I'm optimistic that the legislation will move forward more or less as is. We have some concerns about exemptions and want to make sure that any class of entities, or any individual entities, getting exemptions are as restricted as possible and that there's full disclosure and transparency around who's getting exemptions and why they're getting exemptions. Not saying that exemptions may be necessary in some circumstances but wanting to have greater transparency around that, and just given the makeup of the Australian Parliament, I mean the government has the votes to pass this and I am very confident that this measure and other measure will have the support of the Greens and the rest of the Cross Bench as well. So, it's possible that the opposition supports this legislation as well, but even without that opposition support it has the votes to pass.

ROMAN: Thanks Jason and Seb. Just to give you a bit more information as well, none of this, because it was information which was previously considered private, because what this will work from what I can what I can see in legislation, it'll work in a similar way to the current ATO disclosure regime. I don't know if you're aware, where companies, and have had to for about five years now, disclose their tax income, tax payable, taxable income et cetera. Now that we've done quite a bit of research on it, that's not perfect either, but again, it's better than nothing and, you know, we've advocated for additional disclosures to that regime, so I think as Jason said, I think it's a world first. It'll be good just to get this off the ground and, you know, we will do some research to see if it's useful, or has information Content - as we call in an accounting research - we'll be able to sort of test that, maybe in a year or two, after we have a couple of years worth of data. But yes, I mean it's not perfect but because, you know, there are those privacy concerns that the ATO has, they always have to weigh those, and corporates obviously- I mean it'd be great if we have access - public access - to their tax returns, then we'd have all the information, but yeah, I guess that's you know that's not going to happen. Now with respect to ETR, it is the best proxy we have, and as I said an actual tax aggressiveness avoidance is unobservable. ETR is the best proxy we've had, both what we call a gap ETR, that is it's an accounting based ETR, and the cash ETR, which is based on tax paid, yeah BTS based on tax expense, it's been the most widely used, as you said it's something, it's used by investors, it's used by analysts, it was going to be used as part of the minimum global tax stuff, and as far as I'm aware whenever that comes through it'll probably be used as well. The problem, as I said, it has the- because it's, I mean, you know, Gap ETR in particular, that's an accruals based measure, accruals accounting based measure, so it has items which have nothing to do with tax avoidance. So, and we've just sort of started doing that research in terms of trying to tease out from that. The problem in Australia in particular you've got to hand collect the data, because it's not available in databases, and that takes a long time. But what we'll do is, and I'm happy to send you the papers if you send me your details, and we will certainly try to, you know, publish the paper in academic journals and then in the media to let people know what we think is a better measure and that- and we'll call it an adjusted ETR. We've actually done some research with super funds, because they also have similar problems, and we've come up with an adjusted ETR for super funds, and hopefully that should be published soon as well. But yeah, look, we're not gonna, I don't think we're gonna get too much better than ETR, I mean I'd love to have specific measures of, you know, transfer pricing but that's that's all going to happen. So yeah, look, stay tuned. Look, if investors ask you, I mean you can tell them ETR is the best, but they need to be very careful and as I said, you know, hopefully we'll publish some new research this year, and, you know, maybe investors' analysts will start using that as well. Okay. Does that answer your question Seb?

SEB: Yeah, absolutely. Thank you very much both, very helpful, and I'll send you my details.

ROMAN: Send us your details if you can. Look, I think we'll probably go five minutes over time and I want to get to Ross and PRRT, which is probably even more exciting and has huge potential for revenue raising. So Ross, because Ross actually did the report when we worked with GetUp! together, and presented that report before the the Senate inquiry 5-6 years ago. So Ross, can you tell us exactly what BRRT is, and what the problems have been so far, and how it could be improved potentially? Because it seems like the government is finally onto that.

ROSS: Okay. With the petroleum resources rent tax - it's the introduction of a rent tax - was actually a very good move, because prior- previously we had royalty regimes and royalties are a rather aggressive. They apply taxes regardless of the profitability of the operation, so therefore they kind of will deter investment in certain areas, whereas however the, so, therefore when they introduced the resources rank tax back in the 1960s it was, there was, Australia had no known reserves of petrol, and it was mainly about the the oil rather than gas was not, you know, thought of at the time. Now with the applications the PRRT to gas there's a couple of major issues that come into it. One is the nature of gas production, it requires huge amounts of upfront costs, you know, involved in setting it up, which is some something that petroleum oil production doesn't require. So therefore in order to get the gas up and running these huge costs accumulate. Now they- the the problem with that is not so much that, you know, they have these huge costs, it's that they can have this thing called an uplift rate on the PRRT, which is for exploration cost is 15% plus the bond rate, and for production costs it's 5% plus the bond rate. Now if the bond rates had stayed at 1% you were looking at. you know. doubling the value in five years of your costs. Now because the costs are taking you eight years to get some of these operations up and running, the initial costs - their expiration costs - have already, you know, more than doubled by the time they start producing oil to produce profit, and so therefore they're having issues, because that's why Australia's revenues from the PRRT is so much lower than the comparable other countries, like Jason mentioned, we've got the, you know, we're the biggest producer of natural gas anywhere in the world now and yet we're receiving far less in resource rent taxes than any other country - then any comparable country. So there's one thing that's the main problem with this uplift rate, and the second one of course was that they can transfer these costs between projects, which means they're loading up certain projects - profitable projects - with lots and lots of costs from other projects. So they're loading it up in two ways in order to kind of keep their- because they'll only pay any tax on profits over a certain amount and they start paying you know 40%, which is pretty big, so therefore there's a big incentive for them to load up with costs so that they never actually start paying any kind of tax on it, well that's how it seems to be going, it will likely, supposedly in the long run you'll start getting, you know, higher rates of tax on it but by then the gas has probably run out all the demand will have dried up because we'll have moved on from gas. We're looking, you know, 20 years in the future. So that's pretty much it about the PRRT. I'm not sure, I haven't read up on, what the government's proposing currently - the current changes - okay, but that's just a little bit of background on the PRRT

ROMAN: And we know they haven't paid much because they do have to disclose that as part of the ATO disclosure, so you can actually see what these companies have contributed, and it's not much. Maybe to finish off I'll get Jason maybe to maybe to finish off in terms of what the government is- what you think maybe they'll- how they'll change the PRRT to get revenues flowing? Because gas prices are astronomical, they are producing now, they are producing now and have been for a while, I think for at least a couple of years, those gas fields came online. So what's- have we had any sort of, I mean I know it's only just came up, but it might change things.

JASON: Yeah, so let me just first say that we did get some reforms out of the previous government in relation to PRRT, and that they did reduce some of the most egregious aspect of the uplift rates that Ross was talking about, so they did reduce those uplift rates, but you know the industry had hundreds - and still has - hundreds of billions of dollars in PRRT credits on the books, so that's a huge buffer for them paying any PRRT for some years to come. What we- the previous government made those reforms and then kicked the biggest reform down the road into a Treasury consultation, where it's been stalled ever since, and now Treasury has apparently produced a paper that's been sent to the current Treasurer and he's looking at that, and so I very much believe that what we'll see there is a change to the gas transfer pricing mechanism within the PRRT, which basically will move Australia to one set standard, which is simplifying increasing transparency and it's basically a netback only approach, which is what the OECD recommends as the best standard in terms of this kind of related party transaction. Because the PRRT applies to the raw gas and not the sale of the LNG and what the companies will argue, because they're allowed to under the current regulations, is that essentially the resources that they take from Offshore Australian Waters have very little value, and that the value that they get for the LNG and, as Roman pointed out, the prices are sky high ever since the Ukraine conflict. That's not- it's not priced at the sale of the LNG, it's priced at the raw gas, and that's an internal sale within the company, so we think that that- what they'll do is restrict it to one method which allows, you know, less gaming of the system with these related party transactions of the sale of the raw gas, as extracted, before it gets turned into Liquefied Natural Gas and then exported. And we know in 2022 the value of exports of LNG from Australia was about 93 billion dollars and these projects are currently paying absolutely nothing in PRRT. We are getting small amounts of PRRT from old projects in Bass Straits but the lifetime of those projects is is not long, or it has been long but is about to end, I should be more clear. So the Callaghan review of this estimated that, you know, under older, lower world gas prices, 90 billion dollars in revenue over the decade from changing to a netback only approach on the gas transfer pricing mechanism. So that's what we're hoping to see, we have pushed for broader reforms, including an additional 10% royalty on offshore gas, but I'm not going to hold my breath on that one, but I do think that we'll see movement on the gas transfer pricing mechanism.

ROMAN: And I think that what you're talking about is similar to what they have in Canada, with the transfer pricing, and that's why they collect a hell of a lot more in those resource rent taxes than we do.

ROSS: Yeah

ROMAN: Okay, it's quarter to-

ROSS: Yeah sorry, I just have one more thing. There was a question from Greg about Apple's ETR.

ROMAN: Yes.

ROSS: A lot of it that is that 16% is talking about when the U.S tax rate is actually 35%

ROMAN: But it's a Consolidated-

ROSS: It's a Consolidated one about- that's a Global Tax, now along with most U.S. Information Technology called corporations they pay all the tax that they need to in the U.S., that they're required to pay, they just don't pay any tax anywhere else in the world and the US government seems very happy with that situation, because it seems to think the rest of the world- the money that makes the rest of the world is actually-

ROMAN: And correct that's how they get a low consolidated ETR, because they may pay their full tax in the U.S., but remember with the U.S. multinationals, you know, 50% of their revenues come from overseas and those set up in Europe are usually set up in Ireland or something, where the tax rate's a lot less, and they can permanently reinvest and have to bring the profits back to the US. So that's what gets the consolidated ETR a lot less than the corporate rate in in the US. Any final questions before we finish? Any final questions from anyone?

[PAUSE]

All right fantastic. Well I think we- just a few minutes over time, but it's been very educational, hopefully for everyone. Thank you Jason. Thank you Ross.

JASON: Thank you

ROMAN: We've got David here - our Tech person - and everyone else. Any other questions, guys that you have, please don't hesitate to email me, if you'd like. If you have ideas for the webinars, as I said, we're happy to consider them, but- and stay tuned for any new webinars that we'll be putting on. But other than that, anything else? Thank you Seb, thank you guys, hopefully we'll see you next time.

ROSS: Bye.