International tax and the Australian wine industry: Is your client’s product destined to sail the seven seas?

The export market for Australian wine continues to grow at a rapid rate, with imported wines also playing a role in market share in sales in Australia. It is estimated that over 60 per cent of all Australian wine is exported, while 12 per cent of wine consumed in Australia has overseas origins. In addition to understanding the size and direction (import or export) of wines, the foreign locales also play an important role in any tax considerations. While the export market for Australian produced alcohol continues to grow, it is into the Asian market that the most significant inroads are occurring. Sales into China of bottled wine over $7.50 per litre recently overtook the volume sold our traditional partners of the United States and Canada. It is becoming easier for even small to medium sized businesses to export their services or products overseas. However, it is vital for those businesses to understand the tax rules applying to any international transactions. Specifically, one of the first tax regimes that importers and exporters need to understand once they decide to establish a presence overseas is transfer pricing. These are the rules that govern the cross-border prices of goods, services and other transactions entered into between related parties. This paper is Part 2 of the seminar presented on transfer pricing and international tax issues which are particularly relevant to the wine industry. The predominant focus of Part 2 is to discuss four key areas likely to affect international expansion. First, the use of the available transfer pricing methodologies for international related party transactions is discussed. Second, the affects that double tax agreements will have on taking a business offshore are considered. Third, the risks associated with aggressive tax planning through tax information exchange agreements is reviewed. Finally, the paper predicts future ‘trip-wires’ and areas to ‘watch out for’ for practitioners dealing with clients operating in the international arena.

The empirical analysis of cigarette tax avoidance and illicit trade in Vietnam, 1998-2010.

Illicit trade carries the potential to magnify existing tobacco-related health care costs through increased availability of untaxed and inexpensive cigarettes. What is known with respect to the magnitude of illicit trade for Vietnam is produced primarily by the industry, and methodologies are typically opaque. Independent assessment of the illicit cigarette trade in Vietnam is vital to tobacco control policy. This paper measures the magnitude of illicit cigarette trade for Vietnam between 1998 and 2010 using two methods, discrepancies between legitimate domestic cigarette sales and domestic tobacco consumption estimated from surveys, and trade discrepancies as recorded by Vietnam and trade partners. The results indicate that Vietnam likely experienced net smuggling in during the period studied. With the inclusion of adjustments for survey respondent under-reporting, inward illicit trade likely occurred in three of the four years for which surveys were available. Discrepancies in trade records indicate that the value of smuggled cigarettes into Vietnam ranges from $100 million to $300 million between 2000 and 2010 and that these cigarettes primarily originate in Singapore, Hong Kong, Macao, Malaysia, and Australia. Notable differences in trends over time exist between the two methods, but by comparison, the industry estimates consistently place the magnitude of illicit trade at the upper bounds of what this study shows. The unavailability of annual, survey-based estimates of consumption may obscure the true, annual trend over time. Second, as surveys changed over time, estimates relying on them may be inconsistent with one another. Finally, these two methods measure different components of illicit trade, specifically consumption of illicit cigarettes regardless of origin and smuggling of cigarettes into a particular market. However, absent a gold standard, comparisons of different approaches to illicit trade measurement serve efforts to refine and improve measurement approaches and estimates.

Tax+

Un grupo de estudiantes de la Universidad del Rosario encontró la oportunidad de iniciar un proyecto basado en la recuperación de impuestos de renta de los ciudadanos colombianos que trabajan o trabajaron en Estados Unidos, bajo el tipo de visa J1. El mercado en Colombia actualmente se encuentra constituido por aproximadamente 4.256 consumidores cuyo consumo per cápita es de $ 2.143.800 de pesos, la estrategia a utilizar para captar un nivel de clientes importante esta resguardada en el valor agregado del servicio, este pretende ofrecer un precio más bajo que la competencia incrementando la tasa de retorno de impuestos para nuestros clientes. Para iniciar, durante el primer año se espera obtener un 20% de participación en el mercado con 889 clientes, lo que conforma un promedio de 75 personas mensuales. Los pasos que se deben seguir para realizar el trámite de recuperación de impuestos son: 1) Contactar al cliente y darle la información, 2) Envió de los requisitos y formularios para que llene el cliente, 3) Devolución de los papeles diligenciados por el cliente, 4) Envió de papeles a Estados Unidos, 5) Contacto con el agente y devolución del dinero, 6) Informar al estudiante que ya está su dinero, 7) Encuesta de satisfacción. Para esto es necesario contar con un equipo conformado por un gerente general, gerente financiero, gerente de servicio al cliente y gerente comercial. La compañía estará ubicada en Bogotá, sin embargo, Tax + aspira tener un crecimiento importante en el país entrando a ciudades con una actividad importante dentro del mercado de work and travel como lo son Medellín, Cali y Barranquilla. El proyecto se iniciará con la constitución de una sociedad anónima simplificada (S.A.S.), una inversión total de $ 26.000.000 de pesos, la cual se encuentra constituida por un aporte de $ 6.500.000 pesos de cada uno de los miembros del equipo emprendedor, con esto se pretende adquirir los activos fijos y capital necesarios para iniciar el funcionamiento de la empresa. 10 Durante el primer año se espera tener unos ingresos de $ 355.600.000 de pesos, para el segundo año se pretende incrementar el número de clientes a 964, lo cual constituye unos ingresos equivalentes a $ 471.328.000 de pesos, y para el tercer año las ventas esperadas deberán alcanzar los $ 538.204.160 de pesos, que generan una rentabilidad sobre ventas del 6,31%, 0,73% y 1,6%, respectivamente. Para alcanzar el punto de equilibrio la empresa debe vender $322.083.104 al año, lo que indica que se puede alcanzar en el primer año de operación. En el primer año de operación se obtiene un flujo de efectivo de $43.272.320, en el segundo año, $5.570.581 y en el tercero $11.521.539. La tasa interna de retorno del proyecto es de 89,99% y la inversión se recupera en el tercer año de operación.

The impact of price changes on volume sales of alcoholic beverages in Sweden, 2006-2013

We evaluate whether price elasticities on registered alcohol have changed in the last ten years in Sweden, in particular with regard to the investigation by Asplund et al (2007). We also investigate the fiscal effects of such changes. According to our estimates, price elasticities have increased, and these increases may have substantial effects on estimated changes in tax revenues when commodity tax rates are changed. In particular, commodity tax rates on spirits may have reached “Laffer territory” where tax increases may actually lower tax revenues.

Taxing hard-to-tax markets

Tax enforcement costs constrain the government s ability to observe economic transactions, giving rise to hard-to-tax (HTT) markets. In these markets transactions are untaxed and consumers are better o¤ than in taxed markets. This paper studies a novel approach to combat evasion in HTT markets: consumer auditing, which rewards consumers for re- questing transaction receipts. We develop a Hotelling-type spatial model of sales taxation to analyze the welfare and distributional e¤ects of the implementation of this policy. We and that consumer auditing allows for a lower tax rate and greater provision of the public good in the economy. We show that this policy not only can enhance welfare, but also equalize utilities of consumers across markets

Full Cups, Full Coffers: Tax Strategies and Consumer Culture in the Early Modern German Cities

During the sixteenth and seventeenth centuries, the excise taxes (Ungeld) paid by town residents on the consumption of beer, wine, mead and brandy represented the single most important source of civic revenue for many German cities. In a crisis, these taxes could spike to 70-80% of civic income. This paper examines civic budgets and 'behind-the-scenes' deliberations in a sample of towns in southern Germany in order to illuminate how decisions affecting consumer taxes were made. Even during the sobriety movements of the Reformation and post-Reformation period, tax income from drinkers remained attractive to city leaders because the bulk of the excise tax burden could easily be shifted away from privileged members of society and placed on the population at large. At the same time, governments had to maintain a careful balance between what they needed in order to govern and what the consumer market could bear, for high taxes on drinks were also targeted in many popular revolts. This led to nimble politicking by those responsible for tax decisions. Drink taxes were introduced, raised, lowered and otherwise manipulated based not only on shifting fashions and tastes but also on the degree of economic stress faced by the community. Where civic rulers were successful in striking the right balance, the rewards were considerable. The income from drink sales was a major factor in how the cities of the Empire survived the wars and other crises of the early modern period without going into so much debt that they lost their independence.

Full Cups, Full Coffers: Tax Strategies and Consumer Culture in the Early Modern German Cities

During the sixteenth and seventeenth centuries, the excise taxes (Ungeld) paid by town residents on the consumption of beer, wine, mead and brandy represented the single most important source of civic revenue for many German cities. In a crisis, these taxes could spike to 70–80% of civic income. This paper examines civic budgets and ‘behind-the-scenes’ deliberations in a sample of towns in southern Germany in order to illuminate how decisions affecting consumer taxes were made. Even during the sobriety movements of the Reformation and post-Reformation period, tax income from drinkers remained attractive to city leaders because the bulk of the excise tax burden could easily be shifted away from privileged members of society and placed on the population at large. At the same time, governments had to maintain a careful balance between what they needed in order to govern and what the consumer market could bear, for high taxes on drinks were also targeted in many popular revolts. This led to nimble politicking by those responsible for tax decisions. Drink taxes were introduced, raised, lowered and otherwise manipulated based not only on shifting fashions and tastes but also on the degree of economic stress faced by the community. Where civic rulers were successful in striking the right balance, the rewards were considerable. The income from drink sales was a major factor in how the cities of the Empire survived the wars and other crises of the early modern period without going into so much debt that they lost their independence.

Investigating the effects of the 2007 Texas tobacco tax increase on the smoking behavior of adults

Smoking is major cause of premature mortality and morbidity in the United States. The health consequences of tobacco usage are increasingly concentrated in minority and lower socioeconomic groups. One of the most effective means of deterring tobacco consumption and generating revenue to fund prevention activities is the levying of excise taxes. In 2007 the state of Texas increased the excise tax on cigarettes by $1.00 per pack. This study sought to determine if there was a significant effect on smoking prevalence in the state by examining Behavioral Risk Factor Surveillance System (BRFSS) data for two years leading up to the tax increase-2005 and 2006- and two years post tax increase -2007 and 2008. Results were compared against a chi square distribution and three multiple logistic regression models were created to adjust for race/ethnicity, age, education and income. Results from this study show that there was not a significant decrease in smoking prevalence for most of the groups stratified by age, income and ethnicity. There was not a significant decrease in the younger adults aged 18-34 by income, ethnicity, or education. Smoking prevalence increased for some groups, e.g., Hispanic females. In the regression models, the tax effect was not significant. While overall prevalence decreased by 9%, there were not significant reductions among non-White or Hispanic survey participants. Taxed sales dropped by approximately 17% according to the Texas Comptroller. Without BRFSS data measuring daily cigarette consumption among current smokers, now not assessed, it is impossible to determine whether the discrepancy in reported prevalence and taxes sales is attributable to consumption of fewer cigarettes among smokers or tax avoidance.^

The breakdown of IRS tax enforcement regarding multinational corporations : revenue losses, excessive litigation, and unfair burdens for U.S. producers : hearing before the Committee on Governmental Affairs, United States Senate, One Hundred Third Congress, first session, March 25, 1993.

Shipping list no.: 93-0404-P.

Getting the most out of every tax dollar : government management and budget 1992 : hearing before the Committee on Governmental Affairs, United States Senate, One Hundred Second Congress, second session, February 6, 1992.

Shipping list no.: 93-0637-P.

Management and program audit, collection of sales and income taxes receivable, Department of Revenue.

"May 1991."

Tax Reform Act of 1986 : hearings before the Committee on Finance, United States Senate, Ninety-ninth Congress, second session.

"March 4, 1986"--Pt. 5.

Flat-rate tax : hearings before the Committee on Finance, United States Senate, Ninety-seventh Congress, second session.

Item 1038-A, 1038-B (microfiche).

Foreign Sales Corporation Act : hearings before the Committee on Finance, United States Senate, Ninety-eighth Congress, first session, on S. 1804 ....

Item 1038-A, 1038-B (microfiche)