However as argued in the early part of this chapter there is a need for a

However as argued in the early part of this chapter

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However, as argued in the early part of this chapter, there is a need for a richer dialogue among community-ATO-parliament, carried forward at public conferences and in the media, to which the judiciary is exposed and chooses to respond as it sees appropriate. A dilemma of business-industry partnership is that business norms are not pro- tax, but anti-tax (witness the egg-shape of compliance in Figure 9.1). A risk of partnership, therefore, is that the tax office will be captured by an anti-taxpaying culture. One idea for a new paradigm of community partnership to respond to this change of capture would, we suspect, be premature until some of the other strategies in this chapter were given more time to work. This is the idea of the government negotiating with the business community a compliance-tax-rate- spiral . The reason it may be a bad idea at this time is that there are too many corporations presently paying no tax who therefore have no interest in trading off higher compliance for lower company tax rates. However, floating the possibility of a compliance-tax-rate-spiral as something that might work in future could encourage public-regarding business taxpayers to see that in the long run there is much that Australian business could gain from a more cooperative compliance culture. So how would a compliance-tax-rate-spiral work? The tax authority would set say five quantitative corporate compliance benchmarks. They would be benchmarks
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Large Business and the Compliance Model 189 that involved an estimate of the extra dollars brought in by improved compliance. As each benchmark was met, the government’s promise would be to reduce company tax rates by 2 per cent. If all five corporate compliance benchmarks were surpassed, the company tax rate would fall by 10 per cent. The compliance benchmarks would be set so that the aggregate increase in revenue from increased tax and increased penalties on non-compliers at each benchmark would be calibrated at the cost of a 2 per cent tax cut. It would be highly desirable to incorporate tax penalties into the formula because this would give community- minded businesses an incentive to lend political support to higher penalties for non-compliers (that would be returned to compliers in lower tax rates). Business partnerships might be built on reversing the existing reality where non-compliers do not pay and compliers make up for it, with a mechanism where non-compliers pay monies that are channeled directly to compliers. While the government would generate no extra revenue by giving back all the gains from higher compliance and higher penalties in lower tax rates, it would generate a little extra revenue as the compliance rate moved up between benchmarks. Both business and the ATO would benefit from lower tax administration costs as the system moved to a more cooperative, less combative, compliance regime. But most importantly, business and government would both benefit from the higher income that a low tax, low litigation, high compliance compact would bring.
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  • Fall '16
  • tax authority, Australian Taxation Office, Tax Office, Compliance Model

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