The three best predictors when used on their own are capital loss creation via

The three best predictors when used on their own are

This preview shows page 228 - 229 out of 311 pages.

The three best predictors when used on their own are ‘capital loss creation via asset sales’, ‘bank accounts and investments held in a listed country’ and ‘trust distributions taxable distributions to a loss entity’, each accounting for approximately the same proportion of variance in the dependent variable. Using Dollars at Risk on a Specific Issue to Predict High Overall Risk A comparison of Tables 10.1 and 10.2 shows that the most common high risks are not the most costly high risks necessarily. Consequently, instead of using flags, the next set of analyses use dollars at risk (see Table 10.2) on each of the 207 specific issues to predict high overall risk and number of high risks. Table 10.6 shows the significant issues included in a model using dollars at risk to predict the probability of an overall high risk. As before, a forward stepwise logistic regression algorithm is used. However, issues were added to the predictive set until the likelihood ratio test for their inclusion was not significant. The analysis includes the implicit assumption that no dollars are at risk if a value is not recorded. This may not always be correct. The logistic model including the dollars at risk for the issues in Table 10.6 correctly predicts approximately 95 per cent of the HWIs into their overall risk group. If we used a scree test slope as was done earlier, only three issues would have been shown and the percentage correctly predicted would have been 90.2. Most of the issues that make it into the final model at the conclusion of this chapter (see Table 10.8), based on the subjective risk ratings, do get some support from the more objective risk ratings data in Table 10.6. Having involvements in an offshore-unlisted country has multiple entries in Table 10.6. Trust distributions also feature in Table 10.6. ‘Trust distributions – capital distributions in cash (to the HWI)’ is the second highest objective predictor. 11 ‘Utilisation of revenue losses via intra group transfers’ is also present. Capital loss creation does not appear nor does ‘other miscellaneous items – other’. Dollars at risk recorded in ‘capital loss creation by asset sales’ and ‘other miscellaneous items – other’ are actually significant predictors of high overall risk, but they are not as important as some of the others, nor are they as important in adding additional predictive information once some of the other issues are included in the model. All the HWIs who were given a high risk rating on ‘other miscellaneous items – other’ had zero or no dollars recorded, so it is not surprising this issue is not amongst the best. There is interest also in issues from the list of 207 that crop up in the dollar- based analysis that are not in the top predictive sets for the subjective rating analyses. The number three predictor in Table 10.6, ‘property held offshore in a listed country – real estate’, is an interesting one. It was also one of the best independent (stand-alone) predictors of high risk when measured as the number of risks greater than 7, but it did not outweigh the other predictors in Table 10.7.
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  • Fall '16
  • tax authority, Australian Taxation Office, Tax Office, Compliance Model

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