More than naming and shaming needed to stop corporate tax avoidance

The report of the Senate Economics References Committee inquiry into corporate tax avoidance comes with the subtitle – “You cannot tax what you cannot see”, with a strong focus on increased transparency. The majority of the 17 recommendations in the interim report relate to improved transparency of the tax affairs of corporate taxpayers. This is a significant step in the right direction. Recent experiences in the war on corporate tax avoidance both in Australia and overseas confirm that “information is power”. Most notably, we have seen increased transparency changing the behaviour of multinational enterprises as well as inducing governments to act.

Government cracks down on tax avoidance through foreign investment rules

The Turnbull Government announced yet another measure aimed at addressing tax base erosion and profit shifting, placing additional requirements on new foreign investment under the existing national interest test. In the last 12 months Australia has seen various reforms within the tax system. However, this latest initiative is a shift as it links Australia’s tax regime with its foreign investment regime. It sends a broader signal to the market that Australia will look beyond the collection of tax revenues to a consideration of national interest.

Assessing taxpayer response to legislative changes: A case study of ‘in-house’ fringe benefits rules

On 22 October 2012, the Australian Federal Government announced the removal of the $1,000 in-house fringe benefits concession when used as part of a salary packaging arrangement. At the time of the announcement, the Federal Government predicted that the removal of the concession would contribute additional tax revenue of $445 million over the following four years as well as an increase of GST payments to the States and Territories. However, anecdotal evidence at the same time indicated that the Australian employer response was to immediately stop providing employees with such in-house fringe benefits via salary sacrificing arrangements. Data presented in this article, collected from a combination of interviews with tax managers of four Australian entities as well as a review of the published archival data, confirms that the abolition of the $1,000 in-house fringe benefits concession was perceived as a negative change, whereby employees were considered the ‘big losers’ despite assertions by the Federal Government to the contrary. Using a conceptual map of tax rule change developed by Oats and Sadler, this article seeks to understand the reasons for this fringe benefits tax change and taxpayer response. In particular, the economic and political factors, and the responses of the relevant taxpayers (employers) are explored. Drawing on behavioural economic concepts, the actions, attitudes and response of employers to the rule change are also examined. The research findings suggest that the decision by Australian employers to cease providing the in-house fringe benefits as part of a salary-packaging arrangement after the legislative amendment was impacted by more than simple rational behaviour.

Measuring tax efficiency: A tax optimality index

This paper introduces an index of tax optimality that measures the distance of some current tax structure from the optimal tax structure in the presence of public goods. This index is defined on the [0, 1] interval and measures the proportion of the optimal tax rates that will achieve the same welfare outcome as some arbitrarily given initial tax structure. We call this number the Tax Optimality Index. We also show how the basic methodology can be altered to derive a revenue equivalent uniform tax, which measures the tax burden implied by the public sector. A numerical example is used to illustrate the method developed, and extensions of the analysis to handle models with multiple households and nonlinear taxation structures are undertaken.

Public good provision and the welfare effects of indirect tax harmonisation

The paper considers the welfare effect of the harmonisation of indirect taxes in two open economies. The revenue from taxation is used for the production of a non-tradeable public good. The welfare levels are affected via two channels: (i) changes in the levels of public good provision, and (ii) changes in deadweight loss associated with the taxes. We develop a number of rules of harmonisation and derive conditions under which they lead to potential Pareto improvement.

Transfer pricing rules and competing governments

The literature on the regulation of multinationals' transfer prices has not considered the possibility that governments may use transfer pricing rules strategically when they compete with other governments. The present paper analyses this case and shows that, even in the absence of agency considerations, a non‐cooperative equilibrium is characterised by above‐optimal levels of effective taxation. We then derive conditions under which harmonization of transfer pricing rules lead to a Pareto improvement, and show that harmonization according to the ‘arm's length’ principle—the form of harmonization advocated by the OECD—may not be Pareto improving.

Ethical Values and the Integrity of the Climate Change Regime

This book investigates the ethical values that inform the global carbon integrity system, and reflects on alternative norms that could or should do so. The global carbon integrity system comprises the emerging international architecture being built to respond to the climate change. This architecture can be understood as an 'integrity system'- an inter-related set of institutions, governance arrangements, regulations and practices that work to ensure the system performs its role faithfully and effectively. This volume investigates the ways ethical values impact on where and how the integrity system works, where it fails, and how it can be improved. With a wide array of perspectives across many disciplines, including ethicists, philosophers, lawyers, governance experts and political theorists, the chapters seek to explore the positive values driving the global climate change processes, to offer an understanding of the motivations justifying the creation of the regime and the way that social norms impact upon the operation of the integrity system. The collection focuses on the nexus between ideal ethics and real-world implementation through institutions and laws. The book will be of interest to policy makers, climate change experts, carbon taxation regulators, academics, legal practitioners and researchers.

The Australian Nonprofit Sector Legal Almanac 2015

Collected summaries of court cases involving nonprofit organisations, from Australia and overseas, during 2015, along with updates of legislative changes in all Australian jurisdictions. Significant Australian cases included several disputes with State Revenue Authorities about exemption from payroll taxes.

Spotless decided per incuriam? - A contrary view

The article considers the implications of the decision of the High Court in Spotless Services Pty Ltd (1996) 141 ALR 92; 34 ATR 183. It argues in particular that the decision was made per incuriam.

Thin capitalisation – the multinational tax avoidance strategy the budget forgot

We have already seen major amendments to Australia’s tax regime to tackle base erosion and profit shifting (BEPS). Several more significant measures were announced in the federal budget, most notably the diverted profits tax, aimed at multinationals which shift tax to a lower taxing jurisdiction. Yet to date, a very simple tax minimisation strategy has been largely ignored in the ongoing reforms and was ignored in the federal budget. Excessive debt loading is a problem that not been afforded the same attention as other aggressive tax planning strategies adopted by multinationals.

What if tax reform was a fundamental human right?

As an election looms in Australia, the tax debate continues unabated. Self-interest abounds. When we remove self-interest, we are often reduced to standard design principles for a taxation system. Lost in this discussion is the fundamental purpose of tax, which is to finance government expenditure. Most would argue that tax revenue should be sufficient to meet basic economic and social needs of the community. But how does a community determine what these basic economic and social needs should be? One way is by using a human rights framework. This can provide guidance for both developing and developed countries considering tax reform.

Fundamental Tax Legislation [24th Edition]

Fundamental Tax Legislation 2016 contains the essential provisions from the primary legislation that affects Australia's taxation system. Updated and expanded for changes which occurred in 2015, this volume is an indispensable reference for undergraduate and postgraduate students of taxation. The Year in Review section has been updated to summarise the main legislative developments in taxation over the previous 12 months, a listing of the passage of tax related legislation during the last year and the inclusion of reference statistics (such as CPI quarterly figures and individual tax rates for residents and foreign residents). Also fully updated and revised to reflect the changes in 2015 is the Tax Rates and Tables section, which contains an accessible summary of the main tax rates and tables that students will need to refer to for their tax studies.