taste they become more comfortable and continue to do it Novack and Saunders

Taste they become more comfortable and continue to do

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taste, they become more comfortable and continue to do it’ (Novack and Saunders, 1998). A critical litmus test of the culture change is a growing belief in the business community that paying any significant amount of tax is a sign of weakness that might be criticised by shareholders. So it may be that global financial services market pressures will progressively unsettle the inertia and conservatism that delivers a lot of HWI taxpaying at the moment. Moreover, the profits that the US accounting firms seem to be deriving from contingency arrangements at the top end of the market suggest that there is reason for promoters to move down the market offering proactive hustling of more engineering-intensive tax planning.
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264 Taxing Democracy This seems a risk to the revenue that would run down from HWIs and large corporates to players of more intermediate levels of wealth. In addition, it would put at risk the culture of tax compliance at lower levels of the economy which has been reasonably strong in Australia by international standards. The worry is that if ordinary Australians become as cynical as Italians about the tax morality of the rich, we will be at risk of Italian levels of voluntary compliance, or even Colombian levels. As difficult as the Commissioner’s job is, we should never assume it is incapable of getting a lot more difficult. One step that is a priority in Australia is to persuade tax professional bodies to set self-regulatory standards that prohibit contingency fees on reduced tax liabilities. For these reasons, it seems necessary to guard against the risks from global competition in tax hustling by deterring aggression in tax advice. How can that be achieved? It is not against the law to give aggressive tax advice and nor should it be. Advice to break the law is sufficient reason to withdraw a licence to offer tax advice. But we have seen that this is not the real problem. Deterrence is largely beside the point at the moment because taxpayers who breach the law on the basis of a reasonably argued position supplied by a licensed adviser will not be subjected to any penalty tax; they simply pay the back taxes plus interest. This means that it can be rational to go to advisers who push their advice to the limits of what could conceivably be accepted as a reasonably argued position. In the US context, Novack and Saunders (1998) express this rationality as follows: ‘The IRS misses nine out of ten shelters. On the tenth, the company pays back taxes and the government agrees to no penalties’. In the Australian context, there appear to be two highly rational strategies if you are a HWI: One is to go to a conservative adviser respected by the ATO who will put you only into tax planning arrangements which have been approved by the Commissioner in a Private Binding or Public Ruling, and who will do that with maximum transparency to the taskforce. The taskforce is therefore likely to assess you as a low risk. But the other rational strategy may be to conceal a highly aggressive tax
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  • Fall '16
  • tax authority, Australian Taxation Office, Tax Office, Compliance Model

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