Treasury’s rollback of the wildly overbroad Corporate Transparency Act (CTA) reporting requirements was a major step in protecting the privacy of Main Street business owners, but it’s not the only threat out there.
New mandatory country-by-country (CBC) reporting for multinational enterprises (MNEs) operating in Australia marks a radical departure from established practices by forcing private enterprises to expose commercially sensitive and personally linked information to the public domain. The regime is disproportionate, intrusive, and constitutes a violation of the privacy of the businesses and the individuals who own them. As PWC notes:
The Australian Parliament has passed legislation that will introduce public country by country (CBC) reporting obligations with effect from 1 July 2024. This will require large multinational groups with an Australian presence to submit data on their global financial and tax footprint to the Australian Taxation Office (ATO), which will be made available publicly. This new obligation will apply in addition to existing confidential CBC reporting regime and any other public CBC reporting regime that a multinational group may be subject to (e.g. the European Union regime).
The new rules require MNEs to publicly disclose detailed financial and tax-related data for each jurisdiction in which they operate—including profit before tax, income tax paid, related party transactions, employee headcounts, and tangible assets. Unlike the OECD’s disclosure regime, this version goes further by publishing the information on an open-access register.
In the hands of competitors, political activists, or hostile foreign states, this data is not benign. For privately held MNEs, especially family-owned or closely held firms, the disclosure of this information is tantamount to a forced forfeiture of their right to privacy.
The key here is the new rules apply to public and private companies alike. Many multinational firms affected by this regime are private companies, not listed on stock exchanges. These entities are not subject to market disclosure rules precisely because they are privately owned and do not seek public capital. Australia ignores this distinction, and the result is the publication of information rivals can use to reverse-engineer business strategies, margins, resource allocations, contractual relationships and pricing.
Worse, the data cannot be divorced from the individuals behind the companies—a point of particular importance in the United State where the pass-through model is so prevalent. In many jurisdictions, corporate and tax data is linked to Beneficial Ownership (BO) registers. Public CBC data makes it easier to track wealth, investments, and earnings of private individuals. Owners or executives of firms operating in controversial sectors may face heightened risks of targeting, harassment, or extortion. It’s not just a tax transparency measure—it is forced public exposure of US citizens operating private businesses.
As with the CTA, Australia has failed to justify this massive data collection operation. The government has provided no clear evidence that privately held MNEs in Australia are engaging in widespread base erosion or tax abuse that justifies public reporting. Meanwhile, existing tools—like the OECD’s CBC reporting, transfer pricing documentation, and targeted audits—already provide Australia with extensive oversight.
Requiring reasonable disclosure of pertinent information to tax authorities is a key aspect of the tax collection process, but those rules need to be balanced with fundamental protections of privacy. Tax information submitted to the IRS is highly protected for a reason, and the few leaks we’ve seen of IRS data have received widespread attention for the very reason that they threaten the very foundation of our tax collection system.
Australia’s CBC reporting rules trade the privacy of companies and individuals for a political gesture—one that aligns with activist rhetoric rather than balanced governance. In its place, Australia should revert to confidential CBC reporting aligned with OECD standards, protect privately held firms from unnecessary public disclosures, and introduce safeguards to prevent the misuse of the published data.