Commonwealth of Australia Explanatory Memoranda Commonwealth of Australia Explanatory Memoranda[Index] [Search] [Download] [Bill] [Help]
2019
THE PARLIAMENT OF THE COMMONWEALTH OF AUSTRALIA
SENATE
PUBLIC GOVERNANCE, PERFORMANCE AND ACCOUNTABILITY
AMENDMENT (TAX TRANSPARENCY IN PROCUREMENT AND GRANTS) BILL
2019
EXPLANATORY MEMORANDUM
(Circulated by authority of Senator Patrick)
PUBLIC GOVERNANCE, PERFORMANCE AND ACCOUNTABILITY
AMENDMENT (TAX TRANSPARENCY IN PROCUREMENT AND
GRANTS) BILL 2019
OUTLINE
The purpose of the Public Governance, Performance and Accountability Amendment
(Tax Transparency in Procurement and Grants) Bill 2019 is to reform Commonwealth
procurement rules to place greater knowledge and transparency arrangements on government
agencies entering into contracts with companies that are, or have related entities, domiciled in
recognised tax havens. The law will further introduce similar measure into arrangements for
the provision of grants by Commonwealth entities.
While the Australian Government has declared its desire to combat multinational tax
avoidance, there have to date been no measures to provide the government with information
on the foreign tax arrangements of companies seeking to contract with the Commonwealth to
provide goods or services. Nor have government departments and agencies been obliged to
consider the tax arrangements of companies in the tender process. Finally, there have been no
public reporting requirements for government departments and agencies entering into
contracts with companies that are, or have related entities, domiciled in recognised tax havens.
The same deficiencies in information collection, consideration and reporting also apply in
regard to the entities that receive grants from Commonwealth Government agencies.
As a consequence there is no effective transparency in relation to government contractors or
grant recipients that are, or have parent companies, domiciled in tax havens - for example, the
Cayman Islands. While there may be a wide range of legitimate reasons for companies to
make offshore tax arrangements, including in recognised tax havens, there is a strong public
interest in ensuring taxation transparency from entities that receive taxpayer funds, whether
through government contracts or grants.
The Bill will amend the Public Governance, Performance and Accountability Act 2013 to
require the responsible Minister to prescribe foreign countries or parts thereof as tax havens. In
determining whether a country or area should be designated as a tax haven, the Minister will
be required to consult with the Commissioner of Taxation; publish a notice setting out the
country, or the part of the country, the Minister proposes to prescribe; and invite interested
parties to make submissions about the proposed prescription. The Minister must have regard to
advice and submissions received before deciding to prescribe a tax haven.
This process will ensure that the Minister's decision is based on independent expert advice
from the Commissioner of Taxation and provides the opportunity for input from any interested
parties, which may include representatives of the country in question or companies domiciled
in that country or area.
The Bill will further establish three key requirements for both procurement and grants - a
disclosure requirement, a consideration requirement and a publication requirement.
The disclosure requirement will mandate that a company responding to a Commonwealth
Government tender where the offered price for goods or services exceeds $4 million (or $7.5
1
million for construction services) will need to disclose whether the company, or any of its
related entities, are domiciled in a tax haven.
These thresholds ensure that the taxation transparency arrangements will only apply to major
public procurement.
A supplier or grant applicant will also be required to give details of foreign entities that might
not otherwise be available on account of the secrecy laws normally encountered in tax haven
jurisdictions.
The consideration requirement will require officials to consider, in consultation with the
Australian Taxation Office (ATO), any additional risks that a company, or any of its related
entities being domiciled in a tax haven, may have on tax avoidance and transparency.
The publication requirement will impose an obligation on agencies that award contracts to
companies that are, or have related entities, domiciled in a tax haven to publish the number of
contracts and the total value of contracts in their annual reports.
Similar requirements will also apply to the award of grants by Commonwealth agencies.
The Bill will not make it unlawful or otherwise prevent the award of contracts or the provision
of grants to companies and entities that have tax haven links. However it will establish a
much-needed transparency scheme and impose additional due diligence requirements on
officials to ensure that the public interest is properly weighed in Australian Government
contracting and grants processes.
Australian taxpayers have a right to know if any significant amount of taxpayer money is
being given to entities with tax haven links. This law will achieve that objective, and the
information that flows into the public domain will inform policy makers and public debate
about further measures that may be required to strengthen Australia's efforts to reduce
multinational taxation avoidance.
2
NOTES ON CLAUSES
Clause 1: Short Title
1. This clause is a formal provision and specifies that the short title of the Act may be
cited as the Public Governance, Performance and Accountability Amendment (Tax
Transparency in Procurement and Grants) Act 2019.
Clause 2: Commencement
2. This clause provides for the commencement of the whole of the Act to be the day after
this Act receives the Royal Assent.
Clause 3: Schedules
3. This clause states that each Act specified in a Schedule to this Act is amended or
repealed as is set out in the applicable items in the Schedule. Any other item in a Schedule to
this Act has effect according to its terms.
Schedule 1 - Amendments
Part 1--Main amendments
Public Governance, Performance and Accountability Act 2013 (PGPA Act)
Item 1
4. Item 1 inserts additional text into section 6 which provides a Guide to the PGPA Act,
specifying that the amended Act will also place requirements on the accountable authority of
an entity for relevant procurements (if the entity is a Commonwealth Procurement Rules
(CPR) entity) and grants.
Item 2
5. Item 2 inserts into section 8 (The Dictionary) various new definitions and further
defines the relationship of certain definitions and terms to those given in the Commonwealth
Procurement Rules and the Commonwealth Grants Rules and Guidelines. Terms including tax
haven, tax haven supplier, and tax haven grantee are defined by reference to various new
subsections of the Act and are discussed below.
Item 3
6. Item 3 inserts into section 33 (Guide to Part 2 dealing with Planning, Performance and
Accountability) text indicating that Division 8 of the Act is concerned with relevant
procurements by CPR entities and grants.
Items 4 and 5
7. Items 4 and 5 add notes at the end of subsection 46(1) stating that a CPR entity must
include information relating to arrangements entered into with tax haven suppliers as part of
3
relevant procurement in the entity's annual report, and that a Commonwealth entity must
include information relating to grants awarded to tax haven grantees in its annual report.
Item 6
8. Item 6 adds at the end of Part 2-3 of the Act a new Division - Division 8--Relevant
procurements by CPR entities and grants. Division 8 is comprised of Subdivisions A to D.
9. Subsection 49A(1) in Subdivision A defines a tax haven as a country, or a part of a
country, which is prescribed by the rules as a tax haven.
10. Subsection 49A(2) sets out the process by which the Minister may prescribe a country,
or a part of a country, as a tax haven. It provides that the Minister must consult with the
Commissioner of Taxation; publish a notice setting out the country, or the part of the country,
the Minister proposes to prescribe; and inviting any person to make, within a period specified
in the notice, written submissions about the proposed prescription. The Minister must have
regard to submissions received within the specified period.
11. This process ensures that the Minister's decision is based on independent expert advice
from the Commissioner of Taxation and provides the opportunity for input from any interested
parties, which may include representatives of the country in question or companies domiciled
in that country or area.
12. Subsection 49A(3) further provides that if the Minister does not prescribe any country,
or a part of a country, as a tax haven within 6 months after this section's commencement, the
Minister must publish on the Department's website an explanation as to why no such
prescription has occurred. This measure ensures that a decision not to designate any tax havens
in publicly explained.
13. Section 49B of Subdivision B relating to relevant procurement by CPR entities sets
thresholds for the application of the tax transparency regime to Commonwealth procurement
activity.
14. Subsection 49B(1) provides that procurement by a CPR entity is relevant procurement
by the entity if (a) in the case of procurement for construction services--the expected value of
the construction services being procured is $7.5 million or more; or (b) in the case of
procurement for any other goods or services--the expected value of the goods or services
being procured is $4 million or more. These thresholds ensure that the taxation transparency
arrangements only apply to major public procurement.
15. Subsection 49B(2) defines a CPR entity as a non-corporate Commonwealth entity; or a
corporate Commonwealth entity prescribed by the rules.
16. Section 49C sets out the tax transparency information that suppliers must provide in
relation to relevant procurement by a CPR entity.
17. Subsection 49C(1) provides that as part of relevant procurement by a CPR entity, the
accountable authority of the entity must require a supplier's submission made in response to
the procurement to be accompanied by certain tax transparency information. Specifically the
required tax transparency information includes the following:
4
(a) whether the supplier or the supplier's associates (if any) are domiciled in a tax
haven;
(b) if the supplier or the supplier's associates are so domiciled--how the supplier or
the supplier's associates (if any) have complied, or are complying, with any
applicable laws in Australia or elsewhere that relate to tax; and
(c) any other information prescribed by the rules.
18. These requirements will place onus on suppliers to be forthcoming in providing
adequate information to allow consideration of their taxation arrangements in the context of
government procurement.
19. The definition of an associate is inserted by Item 2 into the Dictionary (Section 8). This
defines an associate in relation to a non-Commonwealth entity to include any of the following:
(a) if the entity is a body corporate--a related body corporate (within the meaning of
the Corporations Act 2001) of the body corporate;
(b) if the entity is a partnership--a partner in the partnership;
(c) if the entity is an unincorporated association or body of persons--a member of
the committee of management of the association or body;
(d) if the entity is a trust--a trustee of the trust.
20. The note following subsection 49C(1) clarifies that the provision of tax transparency
information by a supplier to a CPR entity is subject to sections 137.1 and 137.2 of the
Criminal Code which create offences for providing false or misleading information or
documents.
21. Subsection 49C(2) provides that if a supplier's submission in response to the
procurement is not accompanied by tax-transparency information, the accountable authority of
the CPR entity must not accept the submission.
22. Section 49D sets out matters a CPR entity must consider in accepting suppliers'
submissions.
23. Subsection 49D(1) provides that in deciding whether to accept a submission by a
supplier made in response to relevant procurement by a CPR entity, the accountable authority
of the entity must consider:
(a) whether the supplier or the supplier's associates (if any) are domiciled in a tax
haven;
(b) if the supplier or the supplier's associates are so domiciled--how the supplier or
the supplier's associates (if any) have complied, or are complying, with any
applicable laws in Australia or elsewhere that relate to tax; and
(c) any other matter prescribed by the rules.
24. Subsection 49D(2) further prescribes that subsection 49D(1) does not limit the matters
the accountable authority may consider.
5
25. Subsection 49D(3) provides that in considering the matters mentioned in subsection
49D(1) the accountable authority must have regard to the tax-transparency information that
accompanied the supplier's submission; and must consult with the Commissioner of Taxation.
26. Section 49E provides that annual reports by CPR entities must include certain
information about tax haven suppliers.
27. Subsection 49E(1) provides that the accountable authority of a CPR entity must
include in the annual report for the entity:
(a) the number of arrangements entered into with tax haven suppliers as part of
relevant procurement by the entity during the period; and
(b) the value of each such arrangement.
28. Subsection 49E(2) defines a tax haven supplier as a supplier that is, or has an associate,
domiciled in a tax haven.
29. Subdivision C deals with the provision of tax transparency information by
Commonwealth grant applicants.
30. Subsection 49F(1) defines a grant as a provision of financial assistance by, or on behalf
of, the Commonwealth under which relevant money or other Consolidated Revenue Fund
(CRF) money (as defined in section 105(2) of the PGPA Act) is to be paid to a grantee; and
which is intended to help achieve the priorities and objectives of the Australian Government.
31. Subsection 49F(2) provides that subsection 49F(1) does not apply to financial
assistance that is provided as part of an arrangement that is not taken to be a grant (within the
meaning of the Commonwealth Grants Rules and Guidelines).
32. Section 49G sets out that grant applicants must provide tax-transparency information.
33. Subsection 49G(1) provides that as part of the process by a Commonwealth entity to
award a grant, the accountable authority of the entity must require a grant applicant to provide
tax-transparency information including:
(a) whether the applicant or the applicant's associates (if any) are domiciled in a tax
haven;
(b) if the applicant or the applicant's associates are so domiciled--how the applicant
or the applicant's associates (if any) have complied, or are complying, with any
applicable laws in Australia or elsewhere that relate to tax; and
(c) any other information prescribed by the rules.
34. The note following subsection49G(1) clarifies that the provision of tax transparency
information by a grant applicant to a CPR entity is subject to sections 137.1 and 137.2 of the
Criminal Code which create offences for providing false or misleading information or
documents.
35. Subsection 49G(2) provides that if a grant applicant does not provide the required tax-
transparency information, the accountable authority of the Commonwealth entity must not
award the grant to the applicant.
6
36. Section 49H sets out matters a Commonwealth entity must consider in awarding
grants.
37. Subsection 49H(1) provides that in deciding whether to award a grant to a grant
applicant, the accountable authority of a Commonwealth entity must consider:
(a) whether the applicant or the applicant's associates (if any) are domiciled in a tax
haven;
(b) if the applicant or the applicant's associates are so domiciled--how the applicant
or the applicant's associates (if any) have complied, or are complying, with any
applicable laws in Australia or elsewhere that relate to tax; and
(c) any other matter prescribed by the rules.
38. Subsection 49H(2) provides that subsection 49H(1) does not limit the matters the
accountable authority may consider.
39. Subsection 49H(3) provides that in considering the matters mentioned in subsection
49H(1), the accountable authority of the Commonwealth entity must have regard to the tax-
transparency information that accompanied the grant applicant's application; and consult with
the Commissioner of Taxation.
40. Section 49J provides that annual reports by Commonwealth entities must include
certain information about tax haven grantees.
41. In particular, subsection 49J (1) provides that the accountable authority of a
Commonwealth entity must include in the annual report for the entity:
(a) the number of those grants awarded to tax haven grantees; and
(b) the value of each grant.
42. Subsection 49J(2) defines a tax haven grantee as a grantee that is, or has an associate,
domiciled in a tax haven.
43. Subdivision D deals with certain miscellaneous matters.
44. Subsection 49K(1) provides that a law of the Commonwealth has no effect to the
extent of any inconsistency with the new Division 8, but the law is taken to be consistent with
Division 8 to the extent that the law is capable of operating concurrently with that Division.
45. Subsection 49K(2) provides that a law of the Commonwealth is defined to include the
Commonwealth Grants Rules and Guidelines; and the Commonwealth Procurement Rules.
Item 7
46. Item 7 adds at the end of subsection 105B(1) a note that indicates Subdivision B of
Division 8 of Part 2-3 sets out requirements relating to tax havens for CPR entities in relation
to relevant procurement.
Item 8
47. Item 8 adds at the end of section 105C a note that indicates Subdivision C of
Division 8 of Part 2-3 sets out requirements relating to tax havens in relation to grants.
7
Item 9
48. Item 9 (Application provision) establishes certain provisions - sections 49C and 49D
relating to procurements and sections 49G and 49H relating to grants - inserted into the PGPA
Act will apply in relation to a procurement or a grant after the item commences.
49. Similarly sections 49E and 49J inserted into the PGPA Act will apply in relation to
annual reports for a reporting period beginning after this item commences.
Part 2--Other amendments
Items 10 and11
50. Items 10 and 11 amend section 355-65 in Schedule 1 of the Taxation Administration
Act 1953 (relating to the disclosure of information for government purposes by the ATO) by
inserting items which permit disclosure to accountable authorities and cross referencing with
the PGPA Act the terms "accountable authority of a CPR entity" and "accountable authority of
a Commonwealth entity".
Item 12
51. Item 12 provides that the amendments to section 355-65 in Schedule 1 of the Taxation
Administration Act 1953 made by this Part apply to records and disclosures of information
made on or after the item's commencement (regardless of whether information was obtained
before, on or after that commencement).
8
Statement of Compatibility with Human Rights
Prepared in accordance with Part 3 of the Human Rights (Parliamentary Scrutiny) Act 2011
Public Governance, Performance and Accountability Amendment (Tax Transparency in
Procurement) Bill 2019
This Bill is compatible with human rights and freedoms recognised or declared in the
international instruments listed in section 3 of the Human Rights (Parliamentary Scrutiny) Act
2011.
Overview of the Bill
The purpose of this Bill is to amend Commonwealth procurement rules to place greater
knowledge and transparency arrangements on government departments entering into contracts
with companies or providing grants to persons or companies that are, or have related entities,
domiciled in designated tax havens.
Human rights implications
This Bill does not engage any of the applicable rights or freedoms as it deals with tax
transparency measures relating to Commonwealth procurement and Commonwealth grants.
Conclusion
This Bill is compatible with human rights as it does not raise any human rights issues.
Senator Patrick
9