transactions means of minimising income tax in group 8 6 522 Other

Transactions means of minimising income tax in group

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transactions – means of minimising income tax in group (8) 6 5.22 - Other miscellaneous items – other (9) 6 4.27 $46 153 472 Evidence of value shifting or unusual transactions – means of minimising capital gains tax in group (10) 5 5.62 - Group restructure due to significant new ventures (11) 5 4.24 - Trust distributions – distributions from capital profits reserve (12) 5 4.63 $3 315 175 Trust distributions – capital distribution in cash (to the HWI) (13) 5 4.73 $1 196 229
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210 Taxing Democracy Table 10.2 Issues with highest mean dollars at risk Issue No. HWIs with risk rating > 7 Mean risk rating Mean dollars at risk ($AUS) Related party transactions with an entity in an unlisted country – transfer of trading stock 0 7.00 $379 333 333 Other miscellaneous items – other 6 4.27 $46 153 472 Other miscellaneous items – finance/treasury issues 2 6.25 $34 848 766 Capital loss creation via cost base manipulation 0 5.33 $22 782 914 Related party transactions with an entity in an unlisted country – transfer of assets/property 1 4.20 $21 222 264 Evidence of dividend streaming within group companies 0 3.67 $17 485 377 Related party transactions with an entity in a listed country – granting of guarantees 0 1.00 $17 382 600 Trusts – use of beneficiary loan accounts (loan source unknown) 3 4.28 $16 152 070 Other miscellaneous items – disposal of significant capital items (non-assessable profit) 7 3.93 $15 843 564 Companies – use of shareholder loan accounts (loan source is HWI) 4 3.19 $10 579 077 Capital loss creation via property development/industry 1 3.26 $10 318 261 Significant franking credit surplus in group 0 3.33 $9 464 742 Related party transactions with an entity in an unlisted country – interest income 1 2.57 $9 186 641 Predicting High Overall Risk The initial objective was to use a cluster analytic procedure on the HWI risk factors to show which risks went together, in hope of revealing systemic risk factors that
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Tax Compliance by the Very Wealthy 211 were underpinning a variety of seemingly unrelated risks. It was thought that risk clusters might be particularly useful in targeting types of specific purpose audits. For example, risk cluster A should get audit product X; risk cluster B, product Y; and so on. Unfortunately, it eventuated that cluster analysis was inappropriate because, as described above, high-risk ratings are rare events with joint occurrence of any two specific high risks being even lower. In fact there are only two pairs of issues on which four HWIs are both rated as a high risk; all the other pairwise combinations have fewer HWIs sharing a high risk on both issues. Thus, cluster analysis and other pattern finding methodologies are inappropriate for this data set where the emphasis is on high risk. Empirically this suggests that if a ‘risky’ taxation strategy is measured as a combination of issues assessed as high risk, then these strategies tend to be unique to each HWI or rather shared by very few HWIs.
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  • Fall '16
  • tax authority, Australian Taxation Office, Tax Office, Compliance Model

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