Analyzing Impact of Tax Compliance Act on External Stakeholders

This report examines the impact of the Mandatory Tax Compliance Act on financial reporting in Australian companies, drawing on two key studies: an explanatory case study by Zummo et al. (2017) demonstrating a reduction in corporate tax aggressiveness and an empirical study by Lanis & Richardson (2012) focusing on corporate reactions to social responsibility requirements. The report discusses the implications for accountants, who must possess knowledge of the Act's provisions, and accounting regulators, whose responsibilities increase in evaluating compliance. It also addresses the role of the Australian Taxation Office (ATO) in implementing the Act through educational programs and ensuring corporate compliance. The analysis highlights the importance of adhering to the Act to improve the maintenance of company books and overall financial reporting standards.

Mandatory tax
Compliance Act
Impact on the external reporting stakeholders

Brief introduction of two studies
• The explanatory case study conducted by Zummo et al.,
(2017) shows that the tax aggressive practices of the
corporates have reduced significantly subsequent to the
introduction of mandatory tax compliance act.
• Empirical study by Lanis & Richardson (2012) focused on
the reactions corporates, both aggressive tax practitioners
and non-aggressive tax practitioners, to the requirements
of corporate social responsibility.
• The impact on external stakeholders of mandatory tax
compliance act is discussed in later slides.

Accountants in Australian Companies:
Introduction of Mandatory Tax Compliance Act in the country the
businesses will have to comply with the provisions of the act.
The accountants in the country must have necessary knowledge
on the various provisions of the act that applies to the companies.
The accountants need to ensure compliance with the provisions of
the act while preparing books of accounts.

Accounting Regulators
• The responsibility of the accounting regulators will increase significantly with
the introduction of the act.
• Evaluation of accounting treatments: Evaluation of accounting treatments to
check whether these are in accordance with the mandatory tax compliance act.
• In case of contraventions with the provisions of the act appropriate decision has
to be taken by the regulators to ensure that companies follow the relevant
provisions of the act.
• Improvement in maintaining books of accounts of companies in general with
constant evaluation by accounting regulators.

Australian Taxation Office
• ATO is the premier agency responsible for taxation compliances in the
country.
• In order to implement the mandatory provisions of the act ATO must
conduct necessary programs for the corporates and professionals.
• The businesses should be encouraged to comply with the provisions of
the act by explaining the benefits of compliances with the act.
• Ensure compliance: ATO must ensure that the companies have
complied with the provisions of the mandatory tax compliance act.