You work for an Australian multinational business in the resources sector called Broken River. You have been given the job of determining whether the corporate structure of Broken River is likely to be compliant with the requirements of an international listing in Frankfurt. You find a large number of entities that do not seem to trade, but which are based in the British Virgin Islands, Bermuda, and Jersey. You ask the Chief Financial Officer about these entities, and she mumbles about tax efficiency, but is not very clear about why the entities are required. You ask your external tax advisor about these entities, and they say that Broken River is the resources sector business with the lowest effective tax rate in Australia, which is great! What do you say in your compliance report to the CEO?
a. We should not be transparent about engaging in aggressive tax planning to avoid tax because we do not want the tax authorities in both Australia and Germany to understand our "base erosion and profit shifting" (BEPS) activities between those two countries.
b. We should be transparent about engaging in aggressive tax planning to avoid tax because Broken River is not receiving a proportional share of the net income tax gap for large corporate groups, and it would be in Broken River's interest to increase that share.
c. We should be transparent that we are engaging in tax planning to evade tax because transparency enhances investor confidence and will attract funding for the Frankfurt listing. However, we should expect significantly more investigation by the tax authorities in both Australia and Germany.
d. We should be transparent that we are engaging in tax planning to avoid tax because transparency enhances investor confidence and will attract funding for the Frankfurt listing. However, we should expect significantly more investigation by the tax authorities in both Australia and Germany.
