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

On 1 November 2011 the Minister for Financial Services and Superannuation, the Honourable Bill Shorten MP, announced that Australia would be undertaking a reform of the ‘transfer pricing rules in the income tax law and Australia’s future tax treaties to bring them into line with international best practice, improving the integrity and efficiency of the tax system.’ Mr Shorten stated that the reason for the reform was that ‘recent court decisions suggest our existing transfer pricing rules may be interpreted in a way that is out-of-kilter with international norms.’ Further, he stated that ‘the Government has asked the Treasury to review how the transfer pricing rules can be improved, including but not limited to how to be more in line with international best practice.’ He urged all interested parties to participate in this consultation process. On 16 March 2012, an Exposure Draft and accompanying Explanatory Memorandum outlining the proposed amendments to implement the first stage of the transfer pricing reforms were released. Within the proposed changes is the explicit embedding of the use of the OECD’s Model Tax Convention on Income and on Capital and Transfer Pricing Guidelines for Multinational Enterprises and Tax Administrations to help determine the arm’s length price. Does this mean that Australia engages in an international tax regime?

Australia's adoption of an international tax regime : to engage or not to engage?

On 1 November 2011 the Minister for Financial Services and Superannuation, the Honourable Bill Shorten MP, announced that Australia would be undertaking a reform of the ‘transfer pricing rules in the income tax law and Australia's future tax treaties to bring them into line with international best practice, improving the integrity and efficiency of the tax system.’ Mr Shorten stated that the reason for the reform was that ‘recent court decisions suggest our existing transfer pricing rules may be interpreted in a way that is out-of-kilter with international norms.’ Further, he stated that ‘the Government has asked the Treasury to review how the transfer pricing rules can be improved, including but not limited to how to be more in line with international best practice.’ He urged all interested parties to participate in this consultation process.

Who claims gifts as a tax deduction? An examination of tax deductible gift statistics

Many donors, particularly those contemplating a substantial donation, consider whether their donation will be deductible from their taxable income. This motivation is not lost on fundraisers who conduct appeals before the end of the taxation year to capitalise on such desires. The motivation is also not lost on Treasury analysts who perceive the tax deduction as “lost” revenue and wonder if the loss is “efficient” in economic terms. Would it be more efficient for the government to give grants to deserving organisations, rather than permitting donor directed gifts? Better still, what about contracts that lock in the use of the money for a government priority? What place does tax deduction play in influencing a donor to give? Does the size of the gift bear any relationship to the size of the tax deduction? Could an increased level of donations take up an increasing shortfall in government welfare and community infrastructure spending? Despite these questions being asked regularly, little has been rigorously established about the effect of taxation deductions on a donor’s gifts.

The 1998 tax reform proposal fringe benefits tax and nonprofit organisations

Fringe Benefits Tax (FBT) is a tax payable by employers on the value of certain fringe benefits that have been provided to their employees or to associates of those employees. It was introduced on 1 July 1986 to improve the equity of the taxation system because non-salary and wage benefits were escaping the taxation base. FBT ensures that tax is paid on those fringe benefits provided in place of, or in addition to, salary or wages of employees.

Tax morale, Eastern Europe and European enlargement

This study tries to remedy the current lack of tax compliance research analyzing tax morale in 10 Eastern European countries that joined the European Union in 2004 or 2007. By exploring tax morale differences between 1999 and 2008 we show that tax morale has decreased in 7 out of 10 Eastern European countries. This lack of sustainability may support the incentive based conditionality hypothesis that European Union has only a limited ability to influence tax morale over time. We observe that events and processes at the country level are crucial to understanding tax morale. Factors such as perceived government quality, trust in the justice system and the government are positively correlated with tax morale in 2008.

Who is selling the property?

For sale purposes, the question of who will be the registered owner of the property at completion is normally not difficult to answer. However, the decision in Rolls v Radford [2012] QSC 92 illustrates how things can go badly wrong...

Beat phenomena in metal nanowires, and their implications for resonance-based elastic property measurements

The elastic properties of 1D nanostructures such as nanowires are often measured experimentally through actuation of the nanowire at its resonance frequency, and then relating the resonance frequency to the elastic stiffness using elementary beam theory. In the present work, we utilize large scale molecular dynamics simulations to report a novel beat phenomenon in [110]oriented Ag nanowires. The beat phenomenon is found to arise from the asymmetry of the lattice spacing in the orthogonal elementary directions of the [110] nanowire, i.e. the [-110] and [001] directions, which results in two different principal moments of inertia. Because of this, actuations imposed along any other direction are found to decompose into two orthogonal vibrational components based on the actuation angle relative to these two elementary directions, with this phenomenon being generalizable to <110> FCC nanowires of different materials (Cu, Au, Ni, Pd and Pt). The beat phenomenon is explained using a discrete moment of inertia model based on the hard sphere assumption, the model is utilized to show that surface effects enhance the beat phenomenon, while the effect is reduced with increasing nanowires cross-sectional size or aspect ratio. Most importantly, due to the existence of the beat phenomena, we demonstrate that in resonance experiments only a single frequency component is expected to be observed, particularly when the damping ratio is relatively large or very small. Furthermore, for a large range of actuation angles, the lower frequency is more likely to be detected than the higher one, which implies that experimental predictions of Young’s modulus obtained from resonance may in fact be under predictions. The present study therefore has significant implications for experimental interpretations of Young’s modulus as obtained via resonance testing.

Residential property investment : assessing home ownership long term viability

Home purchase and ownership is seen by the majority of Australians as the basis for a sound investment strategy and to seciure their long term retirement goals. Although home ownership rates in Australia are in excess of 65% of the population, there have been doubts raised as to the effectiveness of purchasing a house as the main source of retirement income. The main issue with this approach is that the house has to be sold to gain access to these funds or the owners have to take out a reverse mortgage to access the capital tied up in their home, which can be more expensive than selling. This paper will carryout a detailed analysis of a number of investment options to determine the effectiveness of home purchase as a long term investment vehicle. This study has found that the long term investment in equities or managed superannuation funds can provide a greater retirement income than the purchase of a residential property for owner occupation

A new legal avenue for pricing GHG emissions? To trade or to tax?

In a September 2010 media release the Prime Minister of Australia presented the terms of reference for the newly established Multi-Party Climate Change Committee. Although the Committee is charged with considering climate change mitigation measures in general, specifically the Committee must consider an appropriate mechanism for the establishment of a carbon price. The purpose of this article is to provide an overview of the mechanisms to be considered by the Climate Change Committee, including the use of emissions trading and carbon levies in other jurisdictions. This article argues that for any effective investigation of a carbon price for Australia to occur, a thorough knowledge of other jurisdictions’ methods for carbon pricing is essential.

A pragmatic approach to intellectual property and development : a case study of the Jordanian copyright law in the internet age

On October 4, 2004, Brazil and Argentina requested that WIPO adopt a development-oriented approach to IP and to reconsider its work in relation to developing countries. In October, 2007, WIPO member States adopted a historic decision for the benefit of developing countries, to establish a WIPO Development Agenda. Although there have been several studies related to IP and development that call for IP laws in developing countries to be development-friendly, there is little research that attempts to provide developing countries with practical measures to achieve that goal. This article takes the copyright law in Jordan as a case study and shows how, in practical terms, a pro-development-oriented approach could be implemented in the copyright laws of developing countries. It provides specific recommendations for developing countries to ensure that their IP laws are aligned with and serve their social and economic development objectives.

Increasing disaster resilience of people and property through fostering collaboration in coastal high hazard zones

As evidenced with the 2011 floods the state of Queensland in Australia is quite vulnerable to this kind of disaster. Climate change will increase the frequency and magnitude of such events and will have a variety of other impacts. To deal with these governments at all levels need to be prepared and work together. Since most of the population of the state is located in the coastal areas and these areas are more vulnerable to the impacts of climate change this paper examines climate change adaptation efforts in coastal Queensland. The paper is part of a more comprehensive project which looks at the critical linkages between land use and transport planning in coastal Queensland, especially in light of increased frequencies of cyclonic activity and other impacts associated with climate change. The aim is improving coordination between local and state government in addressing land use and transport planning in coastal high hazard areas. By increasing the ability of local governments and state agencies to coordinate planning activities, we can help adapt to impacts of climate change. Towards that end, we will look at the ways that these groups currently interact, especially with regard to issues involving uncertainty related to climate change impacts. Through surveys and interviews of Queensland coastal local governments and state level planning agencies on how they coordinate their planning activities at different levels as well as how much they take into account the linkage of transportation and land use we aim to identify the weaknesses of the current planning system in responding to the challenges of climate change adaptation. The project will identify opportunities for improving the ways we plan and coordinate planning, and make recommendations to improve resilience in advance of disasters so as to help speed up recovery when they occur.

Articulation in property programs : an international multi-campus tertiary model

This paper will present program developers and institutional administrators with a program delivery model suitable for cross cultural international delivery developing students from industry through to master’s level tertiary qualifications. The model was designed to meet the needs of property professionals from an industry where technical qualifications are the norm and tertiary qualifications are emerging. A further need was to develop and deliver a program that enhanced the University’s current program profile in both the domestic and international arenas. Early identification of international educational partners, industry need and the ability to service the program were vital to the successful development of Master of Property program. The educational foundations of the program rest in educational partners, local tutorial support, international course management, cultural awareness of and in content, online communication fora, with a delivery focus on problem-based learning, self-directed study, teamwork and the development of a global understanding and awareness of the international property markets. In enrolling students from a diverse cultural background with technical qualifications and/or extensive work experience there are a number of educational barriers to be overcome for all students to successfully progress and complete the program. These barriers disappear when the following mechanisms are employed: individual student pathways, tutorial support by qualified peers, enculturation into tertiary practice, assessment tasks that recognise cultural norms and values, and finally that value is placed on the experiential knowledge, cultural practices and belief systems of the students.

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.

Intellectual property and development : theory and practice

Since the 1960s, many developing countries have introduced IP laws to help them in their social and economic development. Introducing these laws was considered as a civilised act and a precondition of developing countries‘ progress from being =under-developed‘ to becoming =developed‘. In 2004, Brazil and Argentina presented a comprehensive proposal on behalf of developing countries to establish the Development Agenda in the World Intellectual Property Organisation (WIPO). They put forward a view that IP laws in their current form are not helping those countries in their development, as is constantly being suggested by developed countries, and that there is a need to rethink the international IP system and the work of WIPO. The research undertaken examines the correlation between IP and social and economic development. It investigates how IP systems in developing countries could work to advance their development, especially in the context of the internet. The research considers the theory and practice of IP and development, and proposes a new IP framework which developing countries could employ to further their social and economic development.