Australia’s high fees for access to company financial data are costing the nation billions of dollars in lost revenue, according to a new report from the UTS business school.
- Australia has the highest access fees for company financial statements, double the global average
- There is a close link between tax avoidance, high fees and independent scrutiny of corporate records
- The study finds Australia might recoup an extra $8 billion in taxes if fees lowered to UK level
The report, funded by the Get Up! activist organisation under the badge of the Fair Tax Foundation, found the high fees charged by the Australian Securities and Investment Commission (ASIC) for company information were inhibiting transparency and costing the country dearly.
The study, co-authored by Associate Professor Roman Lanis, Dr Brett Govendir and Ross McClure, found ASIC fees for access to financial statements were not only the highest among 30 comparable nations, they were more than double the average impost.
Information tabulated from Kyckr, an Australian business providing access to company registries from multiple countries and an ASIC-approved information broker, found the cost in Australia of almost $47 was 25 per cent higher than the second most expensive, Germany, while jurisdictions such as the UK and New Zealand charged only nominal amounts.
The researchers said they found a significant correlation between tax avoidance and access fees to corporate records.
“In New Zealand, Singapore and the United Kingdom this information is available for free or for a small, nominal fee, whereas Australia appears to charge the highest fees in the world,” the report concluded.
“This provides a substantial barrier in accessing the information and therefore on corporate transparency in Australia.”
Australia has the highest fees for access to financial statements according to the Kickr price list. (Source: Kickr, Fair Tax Foundation)
Australia bucks ‘trend towards free data’
Around 18 months ago, the Federal Government abandoned a plan to sell-off ASIC’s companies registry to private operators.
The registry has been a cash cow for successive governments, with The Australian reporting in late 2016 that it generated fees from companies and the public of more than $700 million a year, despite costing less than $6 million to operate, a return above 10,000 per cent.
Journalist Michael West now runs his own website, after having previously worked for News Corp and Fairfax, and said he probably spent thousands of dollars a year on ASIC company searches.
“Globally, the trend is going the other way, towards lower fees for data,” he told the ABC, pointing to moves towards free searches in the UK and New Zealand.
“It should be free.”
Mr West was also one of the leaders of the campaign to stop the privatisation of the registry, along with Get Up!, although he said he has had no ongoing relationship with the activist group since the registry sale was canned and had no involvement in the Fair Tax Foundation and its initial report.
Mr West said the high cost of company searches is not only an issue for journalists, researchers and activists, but also for other businesses, especially small firms.
“If you’re a creditor you have to go and pay ASIC $39 to find out whether the company you’re dealing with might go belly-up or if its accounts have been qualified by its auditors,” he said.
“These creditors should have a right to this information.”
The ‘tax gap’
GetUp!’s Fair Tax Foundation is also calling for a more rigorous reporting regime, in which foreign multinationals report in a consistent and clear way using Australian accounting standards.
“Calls for greater transparency surrounding corporate tax strategies have been acclaimed by some as a large disincentive to companies from engaging in aggressive tax avoidance, as well as an effective tool in combating corruption and for improving corporate accountability,” the foundation argued.
The study centred on the so-called “tax gap” — the proportional difference between a nation’s average effective tax rate and its statutory tax rate — which has often been used as a measure of tax avoidance.
Average Effective Tax Rate
Statutory Tax Rate
|“10 nation” study average||11.0||26.3||-56.7||$25.75|
Source: Fair Tax Foundation
High fees, low scrutiny, high avoidance
Using this analysis the UK and Norway have the lowest levels of tax avoidance in the detailed study of 10 nations, while Australia is bracketed along with Germany and the Netherlands as having more aggressive tax avoidance, illustrated by lower “tax gap” ratios.
“This provides initial indication that lower access fees are associated with less tax avoidance, as the UK has the lowest fees for this sample while Australia has the highest,” the study concluded.
The authors concede their analysis has a number of limitations which reduce “statistical certainty”, but “the results provide solid support for the contention that high information access fees for financial statements might aid and abet corporate tax avoidance”.
“There is a large economic impact from this association between the fees for financial information and the tax gap.”
While the report found there were a number of differences in financial reporting between the UK and Australia, the biggest difference was the fees for access to corporate accounts — $46.90 in Australia against a nominal $4.11 in the UK.
“This represents a more than tenfold difference between Australia and the UK, while the tax gap in Australia is almost double to that of in the UK.
“For instance, if increased transparency from lower fees in Australia reduced the tax gap to the same level as the UK, there would be an estimated revenue gain of over $8.3 billion per year.”
The United Kingdom also has a much lower statutory tax rate than Australia, which is likely to explain at least some of the much smaller tax gap.
‘Parliament sets the fees’, says ASIC
ASIC told the ABC its fee levels are not self-determined.
“All ASIC’s fees are set by the Commonwealth Parliament and that has always been the case,” said a spokesman for the regulator.
In 2016, following a recommendation from the David Murray-chaired Financial System Inquiry (FSI), the Federal Government moved ASIC to a heavier reliance on cost recovery and fee-for-service funding.
The FSI found ASIC’s previous model of fees and cost recovery lacked transparency and faced the risk of funding cuts unrelated to the delivery of its mandate.
ASIC said its new model “provides greater stability and certainty in its [future] funding.”
This year, ASIC is expected to recoup around two-thirds of its $390 million budget through fees.
However, this figure does not include the more than $700 million from company registries fees, which go to the Federal Government’s consolidated revenue.