Australian Tax Forum

Australian Tax Forum Vol 28 (3) 2014
Outside of Australia
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Australian Tax Forum is a prestigious quarterly journal with the objective of providing discussion on issues in tax policy, law and reform amongst tax professionals.

It is an essential reference source for understanding and contributing to the development of taxation systems worldwide. Australian Tax Forum is aimed at those who want to influence the future development of tax policy. It is an important journal for tax policy makers, academics and libraries.

Articles from the current issue:

  • Can a 20th century business income tax regime serve a 21st century economy? Add to cart

    01 Sep 2015

    This article is the text of the Parsons Lecture given by Michael Graetz at the University of Sydney Law School in April 2015. In it the author reviews the contemporary challenges involved in making international tax policy. These challenges include the tensions of international tax competition whilst balancing both sound economic theory, and politics. The author explains how the 20th Century international tax system that we have is poorly equipped to cope with the 21st Century’s technologically impelled, integrated global economy. With this background the author comments on the potential for tax reform in the US; the options for tax reform in Australia; and key features of the OECD’s Base Erosion and Profit Shifting (BEPS) initiatives. The lecture concludes with 12 predictions about the directions international tax policy will follow. These range from continued international economic competition using tax law; through greater application of anti?avoidance rules; to broader consumption taxes and more equitable taxation of capital probably involving retention of politically popular, economically problematic, corporate income taxes.

  • Small business owners’ attitudes toward GST compliance: A preliminary study Add to cart

    01 Sep 2015

    A significant body of research both internationally and in New Zealand has been devoted to understanding the factors that influence compliance with tax law. Early studies on compliance were primarily focused on individuals and income tax. Recent comprehensive reviews of the literature indicate that groups of taxpayers, such as small businesses, and compliance with other tax types, such as consumption taxes, remain under-explored.

    To contribute to the extant literature, this preliminary study extends prior work on the compliance attitudes or behaviour of small business owners (SBOs) by focusing on their tax attitudes toward New Zealand’s goods and services tax (GST) system. In particular, their perceptions of deterrence (eg chance of being audited or penalised), tax morale, social norms (eg other business taxpayer’s compliance attitudes), perception of the tax system (eg fairness, complexity, tax burden), and tax administration (eg trust in authority) are examined.

    The results show some evidence of “mental accounting” which is in line with Adams and Webley’s study. Not all SBOs perceived the GST system as being reasonably

  • A fair go? A response to the Independent Local Government Review Panel’s assessment of municipal taxation in NSW Add to cart

    01 Sep 2015

    The Independent Local Government Review Panel (ILGRP) recently handed down its final report on the financial sustainability of New South Wales (NSW) councils. The report identifies a number of problems in relation to local government rating practice and recommends that the NSW Government consider replacing the present rate pegging regime, changing the base from which council rates are levied for high density unit complexes and reducing the number of exemptions and concessions currently available. At the heart of the recommendations is an empirically untested contention that the current system of council rates in NSW is inherently inequitable in terms of both inter?municipal equity and capacity to pay. We begin our assessment of the ILGRP claims by reviewing the theoretical foundations of council property taxes. We then provide a synoptic account of NSW municipal rating before empirically assessing equity under the current arrangements. Finally, we propose a set of public policy responses which address the equity problems identified in our analysis.

  • Can taxable income be estimated from financial reports of listed companies in Australia? Add to cart

    01 Sep 2015

    Taxable income may provide some indication as to the credibility of pre?tax accounting profit reported in corporate financial statements, because the two income measures are based on the same set of economic transactions and events. This article examines whether it is possible to estimate a firm’s actual tax liability and taxable income from income tax disclosures under the current Australian Accounting Standard AASB 112 Income taxes, which applies to financial statements for reporting periods commencing on or after 1 January 2005. Specifically, this article examines empirically the problems associated with estimating taxable income from current tax expense — a mandatory disclosure item under AASB 112. Recommendations are also made to improve the income tax disclosure requirements to facilitate estimation of a firm’s taxable income.

  • The Mirrlees Review’s good tax system: “Old world” versus “new world” professor opinions Add to cart

    01 Sep 2015

    This article examines the relevance of the 2012 UK Mirrlees Review’s findings for its “good tax system” for taxpayers in the UK, Australia and New Zealand. This qualitative study on the Mirrlees Review’s findings identifies and interviews a number of tax professors and an economist in these three comparable small to medium sized OECD countries. The three countries have similar cultural, social, economic and political customs and institutions that also facilitate a good comparison.

    This article finds considerable consensus for much of the Mirrlees Review’s good tax system with recent tax reviews in Australia (the 2009 Henry Review) and New Zealand (the 2010 Buckle Review), all preferring land tax, broad income and value added tax regimes. Reflecting this, a high level of consensus was found among the respondents for much of the good tax system. The responses also highlight a number of contentious areas that provide scope for further research. The respondents strongly agreed that political factors dominated tax design in the three countries. The responses further suggested that major tax reform is difficult but possible in the right circumstances. How to successfully achieve tax reform looms as a key area for further research.

  • Taxing cross-border intercompany transactions: Are financing activities fungible? Add to cart

    01 Sep 2015

    The Organisation for Economic Cooperation and Development (‘OECD’) is currently considering best practice approaches to designing rules to prevent base erosion and profit shifting (‘BEPS’) by multinational enterprises (‘MNEs’). However, the OECD makes a distinction between combating BEPS and reducing distortions between the tax treatment of various methods of financing.1 Yet, an unequal tax treatment can create distortions, which incentivises tax planning behaviour.

    Accordingly, this paper aims to improve the tax design of anti?avoidance rules governing MNEs’ cross?border intercompany deductions by introducing the concept of the tax?induced cross?border funding bias. To date, the literature has focussed on the debt bias, which arises from the distortion in the tax treatment between debt and equity financing. On the other hand, the funding bias also includes licensing and leasing activities in addition to debt and equity financing. This presents a novel contribution to the literature.

    This paper examines the conceptual case for why it might be appropriate and feasible to restrict the tax deductibility of cross?border intercompany interest, dividends, royalties and lease payments given their mobility and fungibility. Specifically, it examines whether it is preferable for MNEs to be subject to economic rent taxation, as is attained through reform proposals such as the Allowance for Corporate Equity (‘ACE’), in this context. This presents a novel proposal for taxing cross?border intercompany economic rents which aligns with the main aim of corporate tax harmonisation; namely: to reduce, if not remove, distortions relating to the taxation of cross?border intercompany activities.