Powering innovation through tax concessions: The changing research & development tax incentives

The changes to the R&D tax concession in 2011 were touted as the biggest reform to business innovation policy in over a decade. Three years later, as part of the 2014 Federal Budget, a reduction in the concession rates was announced. While the most recent of the pro-posed changes are designed to align with the reduction in company tax rate, the Australian Federal Government also indicated that the gain to revenue from the reduction in the incentive scheme will be redirected by the Government to repair the Budget and fund policy priori-ties. The consequence is that the R&D concessions, while designed to encourage innovation, are clearly linked with the tax system. As such, the first part of this article considers whether the R&D concession is a changing tax for changing times. Leading on from part one, this article also addresses a second question of ‘what’s tax got to do with it’? To answer this question, the article argues that, rather than ever being substantive tax reform, the constantly changing measures simply alter the criteria and means by which companies become eligible for a Federal Government subsidy for qualifying R&D activity, whatever that amount is. It further argues that when considered as part of the broader innovation agenda, all R&D tax concessions should be evaluated as a government spending program in the same way as any direct spending on innovation. When this is done, the tax regime is arguably merely the administrative policy instrument by which the subsidy is delivered. However, this may not be best practice to distribute those funds fairly, efficiently, and without distortion, while at the same time maintaining adequate government control and accountability. Finally, in answering the question of ‘what’s tax got to do with it?’ the article concludes that the answer is: very little.

The small business CGT concessions: Evidence from the perspective of the tax practitioner

On 21 September 1999 Division 152 was inserted into the Income Tax Assessment Act (1997) (ITAA 1997). Division 152 contains the small business CGT concessions, which enables eligible small business taxpayers to reduce the amount of tax payable on capital gains arising from certain CGT events that occur after 11:45 am on 21 September 1999. One of the principal objectives of the legislation is to provide a concessionary regime for small business owners who do not have the same ability to access the concessionary superannuation regime generally available to employees. When announcing the introduction of the concessions the then Federal Treasurer, Mr Peter Costello, specifically stated that the objective of Division 152 was to provide ‘small business people with access to funds for retirement or expansion’. The purpose of this article is to: one, assess the extent to which small business taxpayers understand the CGT small business concessions, particularly when considering the sale of their business; two, determine which of the four small business CGT concessions are most commonly adopted and/or recommended by tax practitioners to clients; and three, to determine whether the superannuation changes in relation to the capping of the concessional superannuation thresholds have had an impact on the use of the small business retirement concession.

Emerging from the shadows: Tax as a research discipline (Editorial)

More than ever, research is playing an important part in supporting proposed tax reforms and finding solutions to Australia’s tax system. Also, for tax academics the importance of quality research is critical in an increasingly competitive tertiary environment. However, life for an academic can be an isolating experience at time, especially if one’s expertise is in an area that many of their immediate colleagues do not share an interest in. Collegiately and the ability to be able to discuss research is seen as critical in fostering the next generation of academics. It is with this in mind that on the 5th of July 2010 the Inaugural Queensland Tax Teachers’ Symposium was hosted by Griffith University at its Southbank campus. The aim was to bring together for one day tax academics in Queensland, and further afield, to present their current research projects and encourage independent tax research. If was for this reason that the symposium was later re-named the Queensland Tax Researchers’ Symposium (QTRS) to reflect its emphasis. The Symposium has been held annually mid-year on four occasions with in excess of 120 attendees over this period. The fifth QTRS is planned for June 2014 to be hosted by James Cook University.

Why a movie tax will make even more of us pirates

In a nation of rampant illegal downloaders, a tax on movies and television downloads is the last thing we need. Australian consumers and content producers are among those likely to be worse off should Joe Hockey succeed in his efforts to extend GST to online video-on-demand services like Netflix. It is easy to see why Mr Hockey and his state treasurer counterparts have reportedly agreed to this move. That doesn’t mean it’s a good idea.

Fundamental Tax Legislation [23nd Edition]

Fundamental Tax Legislation 2015 contains the essential provisions from the primary legislation that affects Australia’s taxation system. Updated and expanded for changes which occurred in 2014, 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 2014 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.

Inefficient tax slugs all homebuyers

Housing affordability is more than just house prices. It also includes ready access to public transport, schools, good road networks, and of course access to all the basic utilities. However, local governments don’t have the money to build all the infrastructure new housing estates need. So developer charges were introduced as a “user pays” method of funding new urban infrastructure. These charges are levied on property developers by local authorities at the time of planning approval. Some think these costs are passed back to the original land owner by way of lower land prices. But property developers claim these charges are instead added on to new house prices, with a negative impact to housing affordability. When new house prices increase, existing house prices are also dragged up, extending the housing affordability issue throughout the community. However, new research by QUT has uncovered evidence that these costs are not merely passed on to homebuyers, but are passed on at significantly over-inflated rates. In an Australian first, the study empirically examines the impact of developer charges on housing affordability, providing evidence that developer charges are passed on to all homebuyers in the community. So while policy makers think they are charging developers for the provision of infrastructure in new communities, the cost is really being borne by all homebuyers.

Impacts of sodic soil amelioration on hydraulic conductivity and deep drainage in the Lower Burdekin

An understanding of the influence of soil chemistry on soil hydraulic properties is of critical importance for the management of sodic soils under irrigation. The hydraulic conductivity of sodic soils has been shown to be affected by properties of the applied solution including pH (Suarez et al. 1984), sodicity and salt concentration (McNeal and Coleman 1966). The changes in soil hydraulic conductivity are the result of changes in the spacing between clay layers in response to changes in soil solution chemistry. While the importance o f soil chemistry in controlling hydraulic conductivity is known, the exact impacts of sodic soil amelioration on hydraulic conductivity and deep drainage at a given location are difficult to predict. This is because the relationships between soil chemical factors and hydraulic conductivity are soil specific and because local site specific factors also need to be considered to determine the actual impacts on deep drainage rates.

Patriotism’s impact on cooperation with the state: An experimental study on tax compliance

Although it seems reasonable to assume that activating patriotism might motivate citizens to cooperate with the state in reaching societal goals, the empirical evidence supporting this contention is based mostly on correlational rather than experimental studies. In addition, little is known on whether patriotism can be manipulated without simultaneously triggering nationalism and on the psychological processes which determine the patriotism-cooperation relation. This current article reports results of one survey and three experiments that manipulate patriotism by displaying either a national flag or national landscapes or by priming national achievements. The outcomes indicate that reported and manipulated patriotism indirectly increase tax compliance, although the national flag also increases nationalism. National achievements, on the other hand, seemingly increases trust in national public institutions and the voluntary motivation to cooperate, whereas national landscapes only increase the voluntary motivation to cooperate. Hence, it is possible to increase social capital in the form of trust and cooperation through patriotism without fostering nationalism as well.

A Network Model of Static Foam Drainage

On the basis of a more realistic tetrakaidecahedral structure of foam bubbles, a network model of static foam drainage has been developed. The model considers the foam to be made up of films and Plateau borders. The films drain into the adjacent Plateau borders, which in turn form a network through which the liquid moves from the foam to the liquid pool. From the structure, a unit flow cell was found, which constitutes the foam when stacked together both horizontally and vertically. Symmetry in the unit flow cell indicates that the flow analysis of a part of it can be employed to obtain the drainage for the whole foam. Material balance equations have been written for each segment of this subsection, ensuring connectivity, and solved with the appropriate boundary and initial conditions. The calculated rates of drainage, when compared with the available experimental results, indicate that the model predicts the experimental results well.

The dilemma of international capital tax competition in the presence of public capital and endogenous growth

Using an OLG-model with endogenous growth and public capital we show, that an international capital tax competition leads to inefficiently low tax rates, and as a consequence to lower welfare levels and growth rates. Each national government has an incentive to reduce the capital income tax rates in its effort to ensure that this policy measure increases the domestic private capital stock, domestic income and domestic economic growth. This effort is justified as long as only one country applies this policy. However, if all countries follow this path then all of them will be made worse off in the long run.

Impacts of sodic soil amelioration on deep drainage

Groundwater tables are rising beneath irrigated fields in some areas of the Lower Burdekin in North Queensland, Australia. The soils where this occurs are predominantly sodic clay soils with low hydraulic conductivities. Many of these soils have been treated by applying gypsum or by increasing the salinity of irrigation water by mixing saline groundwater with fresh river water. While the purpose of these treatments is to increase infiltration into the surface soils and improve productivity of the root zone, it is thought that the treatments may have altered the soil hydraulic properties well below the root zone leading to increased groundwater recharge and rising water tables. In this paper we discuss the use of column experiments and HYDRUS modelling, with major ion reaction and transport and soil water chemistry-dependent hydraulic conductivity, to assess the likely depth, magnitude and timing of the impacts of surface soil amelioration on soil hydraulic properties below the root zone and hence groundwater recharge. In the experiments, columns of sodic clays from the Lower Burdekin were leached for extended periods of time with either gypsum solutions or mixed cation salt solutions and change s in hydraulic conductivity were measured. Leaching with a gypsum solution for an extended time period, until the flow rate stabilised, resulted in an approximately twenty fold increase in the hydraulic conductivity when compared with a low salinity, mixed cation solution. HYDRUS modelling was used to high light the role of those factors which might influence the impacts of soil treatment, particularly at depth, including the large amounts of rain during the relatively short wet season and the presence of thick low permeability clay layers.

Rapid internal drainage rates in Ferrosols

Adoption of conservation tillage practices on Red Ferrosol soils in the inland Burnett area of south-east Queensland has been shown to reduce runoff and subsequent soil erosion. However, improved infiltration resulting from these measures has not improved crop performance and there are suggestions of increased loss of soil water via deep drainage. This paper reports data monitoring soil water under real and artificial rainfall events in commercial fields and long-term tillage experiments, and uses the data to explore the rate and mechanisms of deep drainage in this soil type. Soils were characterised by large drainable porosities (≥0.10 m3/m3) in all parts of the profile to depths of 1.50 m, with drainable porosity similar to available water content (AWC) at 0.25 and 0.75 m, but >60% higher than AWC at 1.50 m. Hydraulic conductivity immediately below the tilled layer in both continuously cropped soils and those after a ley pasture phase was shown to decline with increasing soil moisture content, although the rate of decline was much greater in continuously cropped soil. At moisture contents approaching the drained upper limit (pore water pressure = -100cm H2O), estimates of saturated hydraulic conductivity after a ley pasture were 3-5 times greater than in continuously cropped soil, suggesting much greater rates of deep drainage in the former when soils are moist. Hydraulic tensiometers and fringe capacitance sensors monitored during real and artificial rainfall events showed evidence of soils approaching saturation in the surface layers (top 0.30-0.40 m), but there was no evidence of soil moistures exceeding the drained upper limit (i.e. pore water pressures ≤ -100 cm H2O) in deeper layers. Recovery of applied soil water within the top 1.00-1.20 m of the profile during or immediately after rainfall events declined as the starting profile moisture content increased. These effects were consistent with very rapid rates of internal drainage. Sensors deeper in the profile were unable to detect this drainage due to either non-uniformity of conducting macropores (i.e. bypass flow) or unsaturated conductivities in deeper layers that far exceed the saturated hydraulic conductivity of the infiltration throttle at the bottom of the cultivated layer. Large increases in unsaturated hydraulic conductivities are likely with only small increases in water content above the drained upper limit. Further studies with drainage lysimeters and large banks of hydraulic tensiometers are planned to quantify drainage risk in these soil types.