The proposed entity taxation regime if adopted will tax non fixed trusts as

The proposed entity taxation regime if adopted will

This preview shows page 236 - 238 out of 311 pages.

genuine transfer of losses as this is accepted as part of normal business practice). The proposed entity taxation regime, if adopted, will tax non-fixed trusts as companies and treat trust distributions as dividends, which would remove much of the tax effectiveness of trusts. This regime, however, has been put on hold at the time of writing. While not such a recent development, the controlled foreign corporations law was introduced to deal with tax haven use. Initially payments to these countries decreased, but in its annual report, the ATO notes that transfers to tax havens have increased significantly since 1996 (Commissioner of Taxation, 2000). Perhaps some aggressive tax planners have found a way of circumventing this legislation. In any case it appears that tax haven use remains a high risk area (Tanzi, 2000). In a dynamic ecology of aggressive tax planning enforcement, tax administrators must adapt to cut out old risk factors just as they must prepare for mutations into new ones. Some of the most recurrent forms of aggressive tax planning are variations on fundamental themes that have been with us for many decades. Yet many of the mutations that seem so new retain the character of those fundamental strategies. A clever new piece of financial engineering may be clever and new at the same time as it is just another way of shifting losses, even if it cannot be recognised at first as loss shifting. Notes 1 The ATO acknowledges the comments made in this paper and notes that the conclusions reached are based on aged data. The practices employed by the HWI
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Tax Compliance by the Very Wealthy 227 Taskforce have significantly changed and the conclusion reached may not be the same if this analysis were undertaken today. 2 For instance, the ATO conceives of aggressive tax planning as techniques which: (a) undermine the policy intent of the law; (b) impact on the integrity of the tax system; and (c) erode community confidence in the fairness and the equity of the tax system. Characteristics which mark aggressive tax planning in the ATO’s view include arrangements which: (a) are contrived and artificial in their method of execution; (b) are uncommercial from a business or economic perspective; (c) are not implemented as specified in contractual and other legal documentation; (d) involve round robin finance or circular movement of funds and loans paid off by future earnings; (e) involve fraud on the revenue; (f) involve permanent tax advantage as distinct from a timing advantage; (g) abuse a specific concessional or anti-avoidance provision contrary to the policy underlying the law; and/or (h) attempt to reduce the amount of tax properly payable and thus create a revenue risk. 3 For example, in some instances analysts have included a risk more than once simply because it is feasible that the risk could fall under more than one category.
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  • Fall '16
  • tax authority, Australian Taxation Office, Tax Office, Compliance Model

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