Tax evasion, inequality, and progressive taxes : a political economy perspective

The standard approach to tax compliance applies the economics-of-crime methodology pioneered by Becker (1968): in its first application, due to Allingham and Sandmo (1972) it models the behaviour of agents as a decision involving a choice of the extent of their income to report to tax authorities, given a certain institutional environment, represented by parameters such as the probability of detection and penalties in the event the agent is caught. While this basic framework yields important insights on tax compliance behavior, it has some critical limitations. Specifically, it indicates a level of compliance that is significantly below what is observed in the data. This thesis revisits the original framework with a view towards addressing this issue, and examining the political economy implications of tax evasion for progressivity in the tax structure. The approach followed involves building a macroeconomic, dynamic equilibrium model for the purpose of examining these issues, by using a step-wise model building procedure starting with some very simple variations of the basic Allingham and Sandmo construct, which are eventually integrated to a dynamic general equilibrium overlapping generations framework with heterogeneous agents. One of the variations involves incorporating the Allingham and Sandmo construct into a two-period model of a small open economy of the type originally attributed to Fisher (1930). A further variation of this simple construct involves allowing agents to initially decide whether to evade taxes or not. In the event they decide to evade, the agents then have to decide the extent of income or wealth they wish to under-report. We find that the ‘evade or not’ assumption has strikingly different and more realistic implications for the extent of evasion, and demonstrate that it is a more appropriate modeling strategy in the context of macroeconomic models, which are essentially dynamic in nature, and involve consumption smoothing across time and across various states of nature. Specifically, since deciding to undertake tax evasion impacts on the consumption smoothing ability of the agent by creating two states of nature in which the agent is ‘caught’ or ‘not caught’, there is a possibility that their utility under certainty, when they choose not to evade, is higher than the expected utility obtained when they choose to evade. Furthermore, the simple two-period model incorporating an ‘evade or not’ choice can be used to demonstrate some strikingly different political economy implications relative to its Allingham and Sandmo counterpart. In variations of the two models that allow for voting on the tax parameter, we find that agents typically choose to vote for a high degree of progressivity by choosing the highest available tax rate from the menu of choices available to them. There is, however, a small range of inequality levels for which agents in the ‘evade or not’ model vote for a relatively low value of the tax rate. The final steps in the model building procedure involve grafting the two-period models with a political economy choice into a dynamic overlapping generations setting with more general, non-linear tax schedules and a ‘cost-of evasion’ function that is increasing in the extent of evasion. Results based on numerical simulations of these models show further improvement in the model’s ability to match empirically plausible levels of tax evasion. In addition, the differences between the political economy implications of the ‘evade or not’ version of the model and its Allingham and Sandmo counterpart are now very striking; there is now a large range of values of the inequality parameter for which agents in the ‘evade or not’ model vote for a low degree of progressivity. This is because, in the ‘evade or not’ version of the model, low values of the tax rate encourages a large number of agents to choose the ‘not-evade’ option, so that the redistributive mechanism is more ‘efficient’ relative to the situations in which tax rates are high. Some further implications of the models of this thesis relate to whether variations in the level of inequality, and parameters such as the probability of detection and penalties for tax evasion matter for the political economy results. We find that (i) the political economy outcomes for the tax rate are quite insensitive to changes in inequality, and (ii) the voting outcomes change in non-monotonic ways in response to changes in the probability of detection and penalty rates. Specifically, the model suggests that changes in inequality should not matter, although the political outcome for the tax rate for a given level of inequality is conditional on whether there is a large or small or large extent of evasion in the economy. We conclude that further theoretical research into macroeconomic models of tax evasion is required to identify the structural relationships underpinning the link between inequality and redistribution in the presence of tax evasion. The models of this thesis provide a necessary first step in that direction.

The inherent international tax regime and its constraints on Australia's sovereignty

Neither an international tax, nor an international taxing body exists. Rather, there are domestic taxing rules adopted by jurisdictions which, coupled with double tax treaties, apply to cross-border transactions and international taxation issues. International bodies such as the OECD and UN, which provide guidance on tax issues, often steer and supplement these domestic adoptions but have no binding international taxing powers. These pragmatic realities, together with the specific use of the word ‘regime’ within the tax community, lead many to argue that an international tax regime does not exist. However, an international tax regime should be defined no differently to any other area of international law and when we step outside the confines of tax law to consider the definition of a ‘regime’ within international relations it is possible to demonstrate that such a regime is very real. The first part of this article, by defining an international tax regime in a broader and more traditional context, also outlining both the tax policy and principles which frame that regime, reveals its existence. Once it is accepted that an international tax regime exists, it is possible to consider its adoption by jurisdictions and subsequent constraints it places on them. Using the proposed changes to transfer pricing laws as the impetus for assessing Australia’s adoption of the international tax regime, the constraints on sovereignty are assessed through a taxonomy of the level adoption. This reveals the subsequent constraints which flow from the broad acceptance of an international tax regime through to the specific adoption of technical detail. By undertaking this analysis, the second part of this article demonstrates that Australia has inherently adopted an international tax regime, with a move towards explicit adoption and a clear embedding of its principles within the domestic tax legislation.

Using staffing ratios for workforce planning : evidence on nine allied health professions - a narrative review

Background: Modern healthcare managers are faced with pressure to deliver effective, efficient services within the context of fixed budget constraints. This requires decisions regarding the skill mix of the workforce particularly when staffing new services. One measure used to identify numbers and mix of staff in healthcare settings is workforce ratio. The aim of this study was to identify workforce ratios in nine allied health professions and to identify whether these measures are useful for planning allied health workforce requirements. Method: A systematic literature search using relevant MeSH headings of business, medical and allied health databases and relevant grey literature for the period 2000-2008 was undertaken. Results: Twelve articles were identified which described the use of workforce ratios in allied health services. Only one of these was a staffing ratio linked to clinical outcomes. The most comprehensive measures were identified in rehabilitation medicine. Conclusions: The evidence for use of staffing ratios for allied health practitioners is scarce and lags behind the fields of nursing and medicine.

The 'variety effect' is anticipated in meal planning

The 'variety effect' describes the greater consumption that is observed when multiple foods with different sensory characteristics are presented either simultaneously or sequentially. Variety increases the amount of food consumed in test of ad libitum intake. However, outside the laboratory, meals are often planned in advance and then consumed in their entirety. We sought to explore the extent to which the variety effect is anticipated in this pre-meal planning. Participants were shown two food images, each representing a first or a second course of a hypothetical meal. The two courses were either, i) exactly the same food, ii) different foods from the same sensory category (sweet or savoury) or, iii) different foods from a different sensory category. In Study 1 (N = 30) these courses comprised typical ‘main meal’ foods and in Study 2 (N = 30) they comprised snack foods. For each pair of images, participants rated their expected liking of the second course and selected ideal portion sizes, both for the second course and the first and second course, combined. In both studies, as the difference between the courses (from (i) same to (ii) similar to (iii) different) increased, the second course was selected in a larger portion and it was rated as more pleasant. To our knowledge, these are the first studies to show that the variety effect is evident in the energy content of self-selected meals. This work shows that effects of variety are learned and anticipated. This extends our characterisation beyond a passive process that develops towards the end of a meal.

International tax cooperation in the Post-GFC era

Over the last five years we have observed the fallout from the global financial crisis (GFC). International cooperation and jointly adopted policies have dominated many of the solutions to the problems which have arisen. Initially, many nations in response to the GFC, implemented a two pronged short term solution by undertaking fiscal intervention and delivering rescue packages aimed at first, bailing out financial institutions and second, preventing or minimising the impact of a recession. Both programs involved large amounts of domestic spending. It was difficult in early 2007 to foresee the reduction that nations were about the face in domestic revenue collected. Five years on, not only have the first line effects of the GFC reduced the revenue raised by governments around the world, but the consequential costs associated with the rescue packages have also depleted domestic revenue bases. The response by stakeholders has been to attempt to secure domestic revenue bases through fiscally sustainable measures. Domestic sovereignty allows the levying of taxes as a nation chooses. However, rather than raise domestic taxes, revenue may also be increased by stemming the flow of income and capital to low and no-tax jurisdictions. The intervening five-year period since the GFC allows a unique insight into the response by nations and international organisations to tax evasion, tax avoidance and aggressive tax competition through the cross border flows of capital and the resulting affect that the GFC has had on international tax cooperation. By investigating the change in the international tax landscape over the last five years, which reveals the work done by stakeholders in developing fiscally responsible responses to the problems that have arisen, it may be possible to predict the trajectory of the international tax landscape over the next five years.

Optimal planning of electric-vehicle charging stations in distribution systems

With the progressive exhaustion of fossil energy and the enhanced awareness of environmental protection, more attention is being paid to electric vehicles (EVs). Inappropriate siting and sizing of EV charging stations could have negative effects on the development of EVs, the layout of the city traffic network, and the convenience of EVs' drivers, and lead to an increase in network losses and a degradation in voltage profiles at some nodes. Given this background, the optimal sites of EV charging stations are first identified by a two-step screening method with environmental factors and service radius of EV charging stations considered. Then, a mathematical model for the optimal sizing of EV charging stations is developed with the minimization of total cost associated with EV charging stations to be planned as the objective function and solved by a modified primal-dual interior point algorithm (MPDIPA). Finally, simulation results of the IEEE 123-node test feeder have demonstrated that the developed model and method cannot only attain the reasonable planning scheme of EV charging stations, but also reduce the network loss and improve the voltage profile.

Planning for the impact of distributed solar energy on the grid

The behaviour of single installations of solar energy systems is well understood; however, what happens at an aggregated location, such as a distribution substation, when output of groups of installations cumulate is not so well understood. This paper considers groups of installations attached to distributions substations on which the load is primarily commercial and industrial. Agent-based modelling has been used to model the physical electrical distribution system and the behaviour of equipment outputs towards the consumer end of the network. The paper reports the approach used to simulate both the electricity consumption of groups of consumers and the output of solar systems subject to weather variability with the inclusion of cloud data from the Bureau of Meteorology (BOM). The data sets currently used are for Townsville, North Queensland. The initial characteristics that indicate whether solar installations are cost effective from an electricity distribution perspective are discussed.

Integrating ICT into the planning process : impacts, opportunities and challenges

Mobile telecommunications have become a key lifestyle and technological trend of the twenty first century. In the context of increased urbanism and pressure on cites for citizen engagement for the purpose of creating good public places the potential of these technologies raises critical questions for planning professionals. Even though technology has become integral to all functions within our urban environment, little is known about perceptions and relationship between urban planners and the ubiquitous, ever-present digital layer of urban data and information. This paper explores this issue, via three focus groups and an additional follow-up interview with planners from local and state government, education and private sector. This paper explores the issues of integrating information and communication technologies into planning practice and the affordances that these technologies offer for community consultation and placemaking.

Planning for transit system reliability using productive performance and risk assessment

Urban transit system performance may be quantified and assessed using transit capacity and productive capacity for planning, design and operational management. Bunker (4) defines important productive performance measures of an individual transit service and transit line. Transit work (p-km) captures transit task performed over distance. Transit productiveness (p-km/h) captures transit work performed over time. This paper applies productive performance with risk assessment to quantify transit system reliability. Theory is developed to monetize transit segment reliability risk on the basis of demonstration Annual Reliability Event rates by transit facility type, segment productiveness, and unit-event severity. A comparative example of peak hour performance of a transit sub-system containing bus-on-street, busway, and rail components in Brisbane, Australia demonstrates through practical application the importance of valuing reliability. Comparison reveals the highest risk segments to be long, highly productive on street bus segments followed by busway (BRT) segments and then rail segments. A transit reliability risk reduction treatment example demonstrates that benefits can be significant and should be incorporated into project evaluation in addition to those of regular travel time savings, reduced emissions and safety improvements. Reliability can be used to identify high risk components of the transit system and draw comparisons between modes both in planning and operations settings, and value improvement scenarios in a project evaluation setting. The methodology can also be applied to inform daily transit system operational management.

Planning for transit system reliability using productive performance and risk assessment

Urban transit system performance may be quantified and assessed using transit capacity and productive capacity for planning, design and operational management. Bunker (4) defines important productive performance measures of an individual transit service and transit line. Transit work (p-km) captures transit task performed over distance. Transit productiveness (p-km/h) captures transit work performed over time. This paper applies productive performance with risk assessment to quantify transit system reliability. Theory is developed to monetize transit segment reliability risk on the basis of demonstration Annual Reliability Event rates by transit facility type, segment productiveness, and unit-event severity. A comparative example of peak hour performance of a transit sub-system containing bus-on-street, busway, and rail components in Brisbane, Australia demonstrates through practical application the importance of valuing reliability. Comparison reveals the highest risk segments to be long, highly productive on street bus segments followed by busway (BRT) segments and then rail segments. A transit reliability risk reduction treatment example demonstrates that benefits can be significant and should be incorporated into project evaluation in addition to those of regular travel time savings, reduced emissions and safety improvements. Reliability can be used to identify high risk components of the transit system and draw comparisons between modes both in planning and operations settings, and value improvement scenarios in a project evaluation setting. The methodology can also be applied to inform daily transit system operational management.

Submission on Financial Planning Association Consultation Paper

This report was submitted to the Financial Planning Association and is confined to the proposals in relation to compliance with the Best Interests duty (Part B) and the provision of Scaled Advice (Part C) in the FPA Consultation Paper, Modifications to the FPA Code of Professional Practice to incorporate FoFA, released in October 2012.

Hybrid game evolutionary algorithm for mission path planning of aerial survey tasks

The aim of this paper is to implement a Game-Theory based offline mission path planner for aerial inspection tasks of large linear infrastructures. Like most real-world optimisation problems, mission path planning involves a number of objectives which ideally should be minimised simultaneously. The goal of this work is then to develop a Multi-Objective (MO) optimisation tool able to provide a set of optimal solutions for the inspection task, given the environment data, the mission requirements and the definition of the objectives to minimise. Results indicate the robustness and capability of the method to find the trade-off between the Pareto-optimal solutions.

An evolutionary computation approach to three-dimensional path planning for unmanned aerial vehicles with tactical and kinematic constraints

This paper presents a novel evolutionary computation approach to three-dimensional path planning for unmanned aerial vehicles (UAVs) with tactical and kinematic constraints. A genetic algorithm (GA) is modified and extended for path planning. Two GAs are seeded at the initial and final positions with a common objective to minimise their distance apart under given UAV constraints. This is accomplished by the synchronous optimisation of subsequent control vectors. The proposed evolutionary computation approach is called synchronous genetic algorithm (SGA). The sequence of control vectors generated by the SGA constitutes to a near-optimal path plan. The resulting path plan exhibits no discontinuity when transitioning from curve to straight trajectories. Experiments and results show that the paths generated by the SGA are within 2% of the optimal solution. Such a path planner when implemented on a hardware accelerator, such as field programmable gate array chips, can be used in the UAV as on-board replanner, as well as in ground station systems for assisting in high precision planning and modelling of mission scenarios.