Given also that Tables 101 and 102 show that the amount of money at risk in

Given also that tables 101 and 102 show that the

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Given also that Tables 10.1 and 10.2 show that the amount of money at risk in these ‘other’ issues is high, there is too much evidence to ignore this ‘other’ effect in an analysis of high risk and we need to consider whether there is some potentially explanatory meaning behind their significance. The four best predictors of overall high risk on their own (without entering other flags into the analysis) are ‘other miscellaneous items – other’, ‘use of an offshore entity in an unlisted country’, ‘trust distributions – capital distributions in cash (to the HWI)’, and the ‘utilisation of revenue losses via intra group transfers’. Table 10.4 Predicting high overall risk with flags * using proxy analyses Alternative set 1 with 91.1% correctly predicted Alternative set 2 with 90.6% correctly predicted Alternative set 3 with 89.4% correctly predicted Use of an offshore entity in an unlisted country (Issue 2) Trust distribution – capital distribution in cash (to the HWI) (Issue 13) Revenue loss utilisation via intra group transfers (Issue 1) Miscellaneous income and deduction items – other significant deduction issues (Issue 4) Miscellaneous income and deduction items – other significant deduction issues (Issue 4) Other miscellaneous items – disposal of significant capital items in review period (non-assessable profit) (Issue 7) Trust distribution – capital distribution in cash (to the HWI) (Issue 13) Evidence of funds coming onshore – irregularly Group structure – use of multiple entities (other) * A flag is a risk from a list of 207 possible risks that an analyst rates over 7 on a risk scale from 1 to 10. Other Risks and the Evolutionary Ecology of Tax Planning As would be expected with more than 200 possible risk labels, the number of HWIs rated above 7 in the ‘other miscellaneous items – other’ category is very small – only six HWIs. But all six have been assigned to the high risk group. This is very high when the probability of being in the high risk group for the whole data set is only 0.14. The Chi-square test of independence has a significance of less than five in a million that this result would have occurred by chance. One source of
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Tax Compliance by the Very Wealthy 215 error in this calculation is that two HWIs who were related were both rated high for seemingly the same issue and thus independence is questionable. However, the test would still remain very significant with the removal of either one of the relatives. Examination of the data also showed that the two HWIs who had the highest number of ‘other miscellaneous items – other’ type issues rated as a high risk were the two HWIs who also had the two greatest numbers of high risks. Overall 8 per cent of the 207 issues were labelled as ‘other’ type issues and they were rated as a high risk 11 per cent of the time.
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  • Fall '16
  • tax authority, Australian Taxation Office, Tax Office, Compliance Model

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