Confidentiality of Corporate Taxpayer Information in the Australian Tax System
Multinational companies often possess commercially sensitive information, the public disclosure of which could harm their competitiveness. This can range from the terms of the contract to the names of the clients. Often, this information is specific to a particular jurisdiction, or even more commonly said not to be directly relevant to a particular jurisdiction. The Australian Taxation Office (ATO), however, often requires aggregate information from groups when reviewing the operations of their Australian entities.
Many groups are reluctant to share data that does not relate directly to Australia with the ATO, which creates difficult relationship issues for the parties. The rights and ability of the ATO to coercively collect such information will not be taken into account. The strategies that could be adopted by the parties to resolve disputes regarding such access to information when they arise will also not be taken into account.
This article will briefly explain how sensitive information provided to the ATO is generally protected. This will be done by reference to legislative rules and also to recent public developments on the subject. Ultimately, this should reassure multinationals that with caution, a high level of confidentiality can be expected with respect to information shared with the ATO. Although at the end of the article is discussed one concerning the development which the representatives of the taxpayers should push for a change of public policy.
Section 355 of Schedule 1 of the Tax Administration Act prohibits the disclosure of âprotected informationâ of a taxpayer by an ATO agent. An officer who violates these provisions is liable to imprisonment for two years. There are exceptions to this rule, including exceptions related to the administration of tax laws and related disputes. Disclosure to courts is permitted, as well as certain other federal government agencies (primarily related to criminal investigations).
Case in point: how does it work in practice?
There have been several recent situations where these rules have been explored.
Public attacks against the ATO or its agents
In Jordan v. Second Commissioner of Taxation  FCA 1602, the Federal Tax Commissioner, Mr. Chris Jordan, made statements regarding a dispute involving Mr. Gould and a related entity Hua Wang Bank. Mr. Gould sued Mr. Jordan for libel. Mr. Jordan sued the ATO (yes, his own office) for access to the ATO material he wanted to use publicly to mount his defense. The court granted access on the grounds that the disclosure was authorized for the purposes of civil proceedings relating to a tax law.
It seems that Mr. Gould and the ATO had been arguing for many years. The public dispute between the parties appears to have been sparked (among other things) by statements by counsel for Mr. Gould that “the ATO is like the Gestapo”.
At a public lunch, Mr Jordan raised the allegations and said a court had found the taxpayer group’s behavior to involve “money laundering, tax evasion and Australian stock insider trading. “.
In the smear trail that followed (Gould v. Jordan (No 2) 2021 FCA 1289), the court held that although Mr. Jordan defamed Mr. Gould, Mr. Jordan’s response was protected by a limited privilege allowing him “to inform those whose judgment of (him) may be affected by attacking (his) response to it. so that he (he) justifies himself â.
It seems clear that a taxpayer and his advisers can, through public attacks on the ATO or its officers, open up to the public disclosure of aspects of their tax affairs by the ATO as part of its policy. defense.
Another exception, mentioned above, was the possibility of disclosing protected information during legal proceedings. While this makes sense, it can create apprehension among taxpayers. Will presenting information to the court make it accessible to the public?
Again, there is a great deal of solace in the rules of the court. The rules of the Federal Court of Australia are the most applicable to multinational tax matters. Section 2 of Part VAA of the Federal Court Act provides for suppression and publication bans, provided that a “primary objective of the administration of justice” is to safeguard the public interest in open justice.
Orders can be made for a number of reasons, including where âthe order is necessary to avoid prejudicing the proper administration of justiceâ (Section 37AG (1) (a)). These include:
- Ensure that “obligations of confidentiality are not lightly dismissed and legitimate expectations of confidentiality in private and confidential transactions and affairs are not lightly ignored” (ABC c. Parish (1980) 43 FLR 129;
- To prevent the “disclosure” or “disclosure of trade secrets to competitors” (ACCC v. Air New Zealand Ltd (No.4) [2021 FCA 1439; and
- To prevent the â[disclosure of] market sensitive information that would be of great value to business competitors’ (ACCC v. Cement Australia Pty Ltd (No 2)  CAF 1082.
The public interest in open justice means that taxpayers must carefully consider the basis on which they will seek such orders.
Court cases concerning requests for legal professional secrecy
Two relevant situations are currently being considered by Australian courts.
The first concerns disputes with the ATO over claims of legal privilege on advice. Two current complaints relate to advice given by PricewaterhouseCoopers in Australia, where the ATO requested the documents (C of T c. PricewaterhouseCoopers (re JBS) VID364 / 2020; and CUB Australia Holding Pty Ltd v. C of T  CAF 43).
In these two cases, the ATO requested certain documents which, according to the taxpayer, are subject to professional secrecy and therefore do not need to be produced in response to formal notices of information gathering (or ‘statutory summons As they are called in some jurisdictions).
The appropriate place to settle such a dispute is the court. But the court will have to examine the relevant documents (or at least a sample of them). They should be highlighted. But the taxpayer will not want them to be seen by the ATO, or members of the public who might attend hearings or view the court file.
In both cases, the court went to great lengths to ensure that the proceedings were conducted in a manner that protected the confidentiality of the evidence, including by excluding non-parties from certain parts of the proceedings and redacting many documents. when placed on the court’s public record.
Court cases concerning TP disputes
The second situation where these issues occur is in TP disputes. When the evidence regarding prices and business processes may be commercially sensitive. The recent nine-day hearing at Singapore Telecom Australia Investments Pty Ltd v. C of T, VID1231 / 2019 is an example. Parts of the evidence were presented while non-parties were absent from the court. And some evidence will generally not be available for public review.
Public disclosure to parliament
The last category is a new category. The Australian Parliament Senate has asked Mr Jordan (the Commissioner of Taxes) to provide some information on the tax affairs of corporate taxpayers who have benefited from the Australian Government’s ‘Jobkeeper’ program (an economic support initiative for the epidemic COVID-19). Mr. Jordan refused, citing “public interest immunity”. The situation is perilous. If successful, the Senate position will open taxpayer data for public disclosure to the Australian Parliament. This could interfere with the administration of the tax system.
This will make foreign taxpayers less willing to share sensitive data with the ATO and could even increase the level of tax litigation in Australia. Since taxpayers may be reluctant to reach a settlement to resolve a dispute, for fear of disclosure of the settlement and information disclosed in the process. Regulations in Australia can be used to agree on salaries for future years, much like an APA. Without attracting the obligation to report the settlement to other tax authorities that often comes with an APP.
On the other hand, parliament maintains that it has an important duty, and power, to review the proper functioning of the executive branch of government. We can easily imagine wanting to review the terms of transactional agreements, especially in public transport disputes.
The Tax Administration Act may not protect the interests of taxpayers in this dispute between the legislature and the executive.
Partner, DLA Piper
Â© 2021 Euromoney Institutional Investor PLC. For help, please see our FAQ.