revenue losses via intra group transfers that is within the group of entities

Revenue losses via intra group transfers that is

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revenue losses via intra group transfers (that is, within the group of entities controlled by the HWI); and (e) ‘other’ extraordinary risks that fall between the cracks. The surprisingly robust results on the ‘other’ measures may suggest that we do not always know what the emerging fundamentals of the future may be. These results are not interpreted as anomalous, but rather as suggesting an evolutionary ecology of tax planning. Tax planning strategies that everyone, particularly the ATO, knows about will not be the most lucrative. While there will be recurrent predation strategies, the best new strategies will be those that are not crowded out by others who use a similar strategy. Minority strategies flourish. We therefore caution against the idea that we can settle in advance all risk categories for aggressive tax planning. We also highlight the importance of intuitive detective work to follow risks that fall between the cracks. This advice follows not only from the importance of the ‘other’ category, but also the result that the estimated ‘objective’ dollars at risk added little explanatory power to the ability to predict high risk above and beyond that provided by subjective risk ratings by ATO analysts. An evolutionary ecology of tax planning implies that some successful players will seek new niches. Financial engineering of new derivatives never conceived
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226 Taxing Democracy before by tax law and global capital mobility make this more possible than in the past (Department of the Treasury, 1999). As the law adapts to close off new niches the change in the tax law environment may also create new niches for other tax strategies. Law makers are less and less able to control these unintended effects as tax law changes in other countries create new niches available to local aggressive tax planners. The aggressive tax planner benefits from both an expanding range of niches globally, and expanding technical capabilities for local financial engineering. The first four red flags listed here may cover the standard niches while the last one covers the new niches. The analyses also suggest a subset of cases that should be examined closely to see if there is evidence of new and previously unseen strategies or niches. These are cases where extraordinary dollar amounts are seen under issues that are not normally red flags, especially in those instances where other red flags suggest systemic risk. Some aspects of the red flags we have identified should cease being indicators of risk to the revenue in future as Australian tax reforms have been undertaken to specifically deal with some of these problems. To this extent, the findings suggest that tax reform was well directed. For instance, the new loss integrity measures should prevent the ‘cascading’ of losses and will address some, but not all loss creation issues. Corporate consolidation measures are intended to limit the ‘trafficking’ of losses from outside the company (but they will not affect the genuine transfer of losses as this is accepted as part of normal business practice).
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  • Fall '16
  • tax authority, Australian Taxation Office, Tax Office, Compliance Model

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