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.

Revitalising the Australian Shipping Industry through Tax Reform: Alchemy or Piracy?

The Australian Federal Government has recently passed reforms to the shipping industry. These reforms are aimed at removing barriers to investment in Australian shipping, fostering global competitiveness and securing a stable maritime skills base. The shipping reform package adopts a two pronged approach designed to achieve its stated goals by providing both a ‘stick’ and ‘carrot’ to industry participants. First, the ‘stick’ is delivered via the provision of tighter regulation of coastal trading operations through a new licencing system, along with the introduction of a civil penalty regime and an increase in existing penalties. Second, the ‘carrot’ is delivered via taxation incentives available to vessels registered in Australia where the registrant meets certain specified criteria. These incentives, introduced through amendments to the Income Tax Assessment Act 1997 and the Income Tax Assessment Act 1936 and contained in the Tax Laws Amendment (Shipping Reform) Act 2012, provide five key tax incentives to the shipping industry. From 1 July 2012, amendments give effect to an income tax exemption for qualifying ship operators, accelerated depreciation of vessels, roll-over relief from income tax on the sale of a vessel, an employer refundable tax offset, and an exemption from royalty withholding tax for payments made for the lease of certain shipping vessels.

Small business entity tax concessions : through the eyes of the practitioner

Australia’s small business sector has pursued often-competing imperatives of simplicity, equity and efficiency in the income tax regime (particularly focusing on the notion of simplicity) over the last decade. In 2001, there was an attempt to provide such simplification and reduce the compliance burden faced by Australian small businesses through the ‘simplified tax system’ (‘STS’). However, despite amendments over the years, the regime is much criticised. This article explores how the STS (now known as the ‘small business entity’ regime or ‘SBE’) is utilised from the perspective of tax practitioners, by analysing their recommendations to small business clients in respect of the regime. The results indicate that practitioners believe the regime did nothing to simplify the tax system for small businesses or reduce tax compliance costs. Indeed, the practitioners believed that the introduction of small business concessions had actually achieved the opposite result — it had increased tax compliance costs for their small business clients. However, tax practitioners still recommend the regime highly because it minimises their client’s tax liability.

An examination of tax-deductible donations made by individual Australian taxpayers in 2010-11

Each year, The Australian Centre for Philanthropy and Nonprofit Studies (CPNS) at Queensland University of Technology (QUT) collects and analyses statistics on the amount and extent of tax-deductible donations made and claimed by Australians in their individual income tax returns to deductible gift recipients (DGRs). The information presented below is based on the amount and type of tax-deductible donations made and claimed by Australian individual taxpayers to DGRs for the period 1 July 2010 to 30 June 2011. This information has been extracted mainly from the Australian Taxation Office's (ATO) publication Taxation Statistics 2010-11. The 2010-11 report is the latest report that has been made publicly available. It represents information in tax returns for the 2010-11 year processed by the ATO as at 31 October 2012.

Tax Deductible Giving in 2010 - 2011:ACPNS Current Issues Information Sheet 2013/1

Each year The Australian Centre for Philanthropy and Nonprofit Studies (ACPNS) at QUT analyses statistics on tax-deductible donations made by Australians in their individual income tax returns to Deductible Gift Recipients (DGRs). The information presented below is based on the amount and type of tax-deductible donations made by Australian taxpayers to DGRs for the period 1 July 2010 to 30 June 2011 extracted from the Australian Taxation Office's publication Taxation Statistics 2010-2011.1

The CGT small business concessions : recent 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). It was subsequently subject to amendments in 2006. 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 (including the sale of the small business itself) that occur after 11:45 am on 21 September 1999. One of the stated principal objectives of the legislation was to provide a concessionary regime for small business owners who did not have the same ability to access the concessionary superannuation regime (particularly the superannuation guarantee charge) generally available to employees. The then Federal Treasurer, Mr Peter Costello, when announcing the introduction of the concessions, specifically stated that the object of Div 152 was to provide “small business people with access to funds for retirement or expansion”. The purpose of this project is to: one, assess the extent to which small business taxpayers understand the CGT small business concessions, particularly when considering sale of their business; two, determine which of the four small business CGT concessions are being adopted and/or recommended by tax advisors to clients; and three, determine whether the recent superannuation changes announced by the Federal Government in relation to the capping of the concessional superannuation thresholds have had an impact on the use of the small business retirement concession. It is anticipated that the results of this study will reveal that that small business owners are reliant on their tax advisors to explain the operation of Division 152. It is plausible that give the complexity of the CGT concessions, most small business owners are completely unaware of the four small business CGT concessions contained in Division 152 and do not understand how these concessions apply. Our study will also reveal the extent to which each CGT small business concession has been adopted (and reasons why). In particular, emphasis will be placed on the adoption of the small business retirement concession contained in Subdivision 152-D (and specific reasons for its adoption). This study also seeks to understand whether the recent (and impending) changes to the concessional superannuation cap has resulted in the retirement concession being more widely adopted (or recommended) by tax advisors. We would expect that the results of our study to confirm this to be the case, particularly coupled with the recent economic downturn, which has led to lower superannuation fund balances. By providing accounting firms with this information, small business owners will benefit from the information, becoming better placed to be long-term self funded retirees, providing not only financial benefits to the individuals and the country, but a significant increase in social self-assurance by these members of the community.

Symone Anstis : the tax advocate for higher education students

Many who have taken a tax course in the last few years will be aware of the plight of Ms Symone Anstis. Her story is a simple one. The year is 2006 and Ms Anstis, an undergraduate student is undertaking a teaching degree at the Australian Catholic University. To support herself she works at Katies earning $14,946, and receives Youth Allowance of $3,622. In her tax return for that year Ms Anstis claims $920 for ‘self-education expenses’ comprising travel, supplies, student administration fees, depreciation on her computer, textbooks and stationery. These expenses totalling $1,170 are correctly reduced by the non-deductible first $250, per s 82A of the Income Tax Assessment Act (1997) (Cth) (ITAA97). Ms Anstis claims a deduction for ‘self-education expenses’ on the basis that a condition of receiving Youth Allowance is the enrolment and satisfactory progress in an acceptable course of study. Generally, a deduction is allowed where a loss or outgoing is incurred in gaining or producing assessable income and that loss or outgoing is not of a private or domestic nature. Ms Anstis claims the expenses are incurred to meet the requirements of maintaining Youth Allowance so the nexus is satisfied. On assessment, the Commissioner of Taxation disallows the deduction claimed on the basis that ‘self-education expenses’ are only deductible if they have a relevant connection to the taxpayer’s current income-earning activities or they are likely to lead to an increase in a taxpayer’s income from his or her current income-earning activities in the future.

An examination of tax deductible donations made by individual Australian taxpayers in 2011–12

This study uses information based on published ATO material and represents the extent of tax-deductible donations made and claimed by Australian individual taxpayers (i.e. not including corporate entities or trusts) to DGRs, at Item D9 Gifts or Donations, in their income tax returns for the 2011-12 income year. The total amount claimed as tax-deductible donations in 2011-12 was $2.24 billion (compared to $2.21 billion in 2010-11), representing 6.85% of all personal taxpayer deductions. Since 1978-79, the actual total tax-deductible donations claimed by Australian individual taxpayers has outpaced inflation-adjusted total tax-deductible donations, measured against the Consumer Price Index. The average tax-deductible donation claimed in 2011-12 increased to $494.25, but the absolute number and percentage of taxpayers claiming donations dropped (to 4.54 million or 35.62%). Analysis is given of individual taxpayers' donation claiming by Gender, State of Residence, Postcode, Income Band, Industry of employment, and Occupation.

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.

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.

Studies on the Effects of Property Taxation, Rent Control and Housing Allowances

Tämä väitöskirja koostuu asuntomarkkinoiden taloustieteellistä analyysia esittelevästä johdantoluvusta ja kolmesta tutkimuksesta, joissa analysoidaan asuntomarkkinoihin vaikuttavia politiikkatoimenpiteitä. Luvussa 2 tutkitaan Suomen kiinteistöverojärjestelmän vaikutusta asuntorakentamiseen. Vuonna 2001 tehtiin uudistus, jonka myötä kunnat voivat verottaa rakentamatonta asuintonttia korkeammalla veroasteella kuin rakennettua tonttia. Maanomistajan rakentamispäätöksen teoreettisen mallin mukaan rakentamattoman tontin korotettu kiinteistöveron pitäisi nopeuttaa rakentamista, mutta toisaalta myös rakentamiseen investoitu rahamäärä saattaa muuttua. Asuintonttien kiinteistöverojen yleinen taso ei vaikuta maanomistajan käyttäytymiseen, sillä tontin verotusarvo ei riipu rakentamispäätöksestä. Vain rakentamattoman ja rakennetun tontin veroasteiden erolla on merkitystä. Empiiriset tulokset ovat sopusoinnussa teorian kanssa. Tulosten mukaan prosenttiyksikön nousu rakentamattoman ja rakennetun tontin veroasteiden erossa lisää omakotialoitusten määrää viidellä prosentilla lyhyellä aikavälillä. Luvussa 3 analysoidaan vuokrasääntelystä vuokralaisille aiheutuvia hyötyjä ja haittoja. Vuokrasäännellyissä asunnoissa asuvat kotitaloudet hyötyvät vuokrasääntelystä alhaisen vuokran muodossa. Heille saattaa kuitenkin koitua myös haittaa siitä, että toiveita vastaavan asunnon löytäminen on vuokrasääntelytilanteessa vaikeaa, koska vapaille asunnoille on suuri määrä ottajia. Vapaarahoitteisen vuokra-asuntokannan vuokrien sääntely purettiin Suomessa asteittain vuosina 1992–1995. Tutkimuksen empiiriset tulokset viittaavat siihen, että vuokrasääntelyn aiheuttamista suurista eroista halutun ja todellisen asuntokulutuksen välillä koituvat hyvinvointitappiot kumosivat merkittävän osan matalien vuokrien hyödyistä vuokralaisille. Luvussa 4 tutkitaan Suomen asumistukijärjestelmän kannustinvaikutuksia. Asumistuen määrää rajoittavat asunnon pinta-alalle ja neliövuokralle asetetut ylärajat. Neliövuokrarajoite voidaan tulkita asumisen laatua rajoittavana tekijänä. Tutkimuksen teoreettisessa osassa osoitetaan, että asumistukijärjestelmä luo vahvat kannustimet muuttaa asuntoihin, joissa pinta-ala- ja laaturajoitteet purevat. Empiiristen tulosten mukaan asumistukeen oikeutetut kotitaloudet eivät näytä reagoivan kannusteisiin. Tukeen oikeutettujen kotitalouksien asumisvalinnat suhteessa pinta-ala ja laaturajoitteisiin vastaavat muiden kotitalouksien valintoja ja asunnonvaihdon mahdollistama potentiaalinen asumistuen lisäys ei nosta muuttotodennäköisyyttä. Muuttamiseen liittyvät kustannukset ja vajavaiset tiedot tukijärjestelmästä saattavat selittää heikkoa reagointia asumistuen luomiin kannustimiin. Toinen mahdollinen selitys on asumistuen vajaakäyttö. Tutkimuksen mukaan vain 70–80 prosenttia asumistukeen oikeutetuista kotitalouksista nostaa tukea. Asumistuen hyödyntämisen todennäköisyys riippuu koulutustasosta, tuen määrästä ja tulo-odotuksista.

Igualdad de sacrificio: una aplicación para el IRPF español

Es bien sabido que el Impuesto sobre la Renta de las Personas Físicas (IRPF) es un impuesto progresivo (aumenta la proporción a pagar cuando aumenta la renta). Aun así es importante saber si el esfuerzo o la pérdida de utilidad que asume cada individuo en el pago del impuesto es el mismo, es decir, si se cumple el principio de igualdad de sacrificio. En este trabajo se plantea si el impuesto sobre la renta en España cumplió este principio en los años 2006 y 2007, y si la reforma fiscal que hubo en estos años nos acercó o alejó de su cumplimiento. La respuesta es que, en líneas generales, sí se cumple, suponiendo esta reforma una mejora relevante para la consecución de este objetivo.