Tax Compliance by the Very Wealthy 219 Table 106 Predicting high overall risk

Tax compliance by the very wealthy 219 table 106

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Tax Compliance by the Very Wealthy 219 Table 10.6 Predicting high overall risk with dollars at risk using logistic regression analysis Step Chi-square df Sig. % correctly classified Dollars at risk for issues 1 15.622 1 0.000 87.7% Trust beneficiary loan accounts – credit balance and no draw-downs 10 2 12.540 1 0.000 88.5% +Trust distributions – capital distributions in cash (to the HWI) (Issue 13) 3 9.977 1 0.002 90.2% +Property held offshore in listed country – real estate 4 9.408 1 0.002 90.6% +Trust distributions to charitable trust 5 7.790 1 0.005 90.2% +Utilisation of revenue losses via trading activities 6 5.348 1 0.021 90.6% +Related party transactions with an entity in an unlisted country – royalty/ license income 7 5.037 1 0.025 91.1% +Use of company shareholder loan account – repayments by HWI 8 4.909 1 0.027 91.5% +Related party transactions with an entity in an unlisted country – provision of finance 9 9.422 1 0.002 93.2% +Revenue loss creation via debt forgiveness/bad debts (Issue 3) 10 5.262 1 0.022 93.2% +Trust distributions – capital distribution in cash (to group entity) 11 11.708 1 0.001 94.9% +Utilisation of revenue losses via intra group transfers (Issue 1) Why would the dollar value of offshore real estate investment not in a tax haven in a listed country help to predict overall risk? Firstly we need to consider the data. There are only two HWIs with dollar amounts ever recorded for offshore real estate investment in an un listed country (a tax haven), so it is not surprising that this issue was not an important predictor. There were not enough cases to pick up any effects. Real estate in tax havens might have. However, there are thirteen non- zero recorded dollar amounts for the issue ‘property held offshore in a listed country – real estate’ (twenty-eight HWIs were rated on this issue with two being rated as a high risk). The two largest dollar amounts were both HWIs where overall they were rated a high risk. This issue then, manages to capture just a few more of
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220 Taxing Democracy the high risk group over and above the first two issues in Table 10.6. On its own, or as is sometimes said, as a direct effect, it is only marginally significant with fifty other issues being more useful. Therefore, although the dollars at risk for this issue adds additional predictive power to the model after the first two issues are included, it is not particularly useful in the predictive sense on its own. How far to speculate an explanation of the predictor is not a simple question. Usually, if the purpose of modelling is explanatory, then theoretical considerations would be used in defining a model rather than an algorithmic approach as used here. That said, it may be reasonable to hypothesise a relationship of some sort between the finding that large real estate investment in a listed country is a high risk, and the earlier finding that a high risk rating for bank accounts and investments held in a listed country were two of the four best independent predictors of the total number of high risk issues. Christopher Skase, the major Australian corporate criminal who fled to Spain, is not included in these analyses. But he is a well known case with large real estate investments and bank accounts in a listed country.
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  • Fall '16
  • tax authority, Australian Taxation Office, Tax Office, Compliance Model

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