Opinion of Taxation Loopholes in Australia - Case Study Example

Opinion of Taxation Loopholes in Australia Name Course Professor University City Date Introduction Australian taxation structure is one of the difficult to deal with globally. It is composed of about 125 taxes that include common wealth taxes such as income tax, capital gains, fringe benefits and goods and services. There are many companies that engage in recreation of diverse and wide-ranging roles within this taxation structure to ensure the integrity of the taxation structure which include the equitability of all Australians under tax scheme in Australia. Thus, this is vital in making organizations to realize how the taxation system works within the Australian community (Cao et al., 2015). The authority under the Australian bill provides security to both states and the public from the commonwealth relatively to their control to levy taxation and formulate laws. A Further constitution limit is enclosed in section 55 of the constitution and this grant that laws daunting taxation will contract only with the obligation of taxation and any condition that deal with any issue shall have no result. This will guarantee commonwealth regulations with relation to income tax is enclosed in separate acts, the assessment law concerned with the valuation and collection of tax and the evaluation Act which impose the taxes and secure the rate of tax (Borrego et al., p.338, 2015). Corporations pay less tax than Aussie workers According to Sloan, (2015) the Australian state faces new calls to reinforce set of laws as journalists globally expose more facts on how global multinational organizations transfer earned income around to world to evade payment of Australian taxes. Pushing this problem backward to the public interest was the disclosure that the largest coalminer in Australia Glencore avoided paying tax for more than three years although they made a profit of $14 billion. However, additional information appears that most of the major companies operating in Australia pay a lesser amount of 10% tax (Hemmings et al., 2015). A set of more than 80 news correspondents from 26 various countries lately exposed the scope of how companies use the tax laws and collect official mails to excuse them from taxes in Luxembourg which then become a scam to evade levies in other nations. International companies transfer their profits to other bureaus and their auxiliary organizations in states with low tax tariffs such as Bermuda, British Virgin Islands, Singapore, and Luxemburg while at the same time transferring their amount overdue to high tax jurisdiction such as Australia, where they obtain superior assumption for debts or operating cost (Sloan, 2015). The complexity of companies’ structures and loopholes are made up of large consulting firm such as (PWC) price water house coopers concerned in current media reporting and brains behind some corporate tax evasion designs. Australia widen legislations to end more companies for tax evasion According to Burnett, (2012) the federal administration has enlarged the scale of legislation designed to deal with global tax evasion, increasing a number of multinational companies under the Australian Tax office’s scrutiny from 30 to 80. The Australian government publicized financial plan actions that will permit the Tax Office to obtain data on multinational companies that have global profits of more than $1billion. Legislation was initiated in parliament to develop the reliability of the tax structure by closing loopholes that will allow multinational companies to evade paying their usual allocation of tax (Damayanti et al., p.180, 2015). The government needs laws passed in time for the regulation to come into effect. The aim of ATO is to control and shape the revenue system that upholds social and economic strategy and fund services for Australians. Their main responsibility is to oversee legislation for taxes and excise duty. The office also tackles expansive issues that affect Australian revenue systems such as debtors, tax plans and globalization. Under the new laws, multinational companies will need to provide the representative of Taxation with facts on general transfer price strategy, and inclusive share of profits. The representative will also provide facts on economic movement in the industry and facts on business between each Australian auxiliary and its related abroad ventures, alongside with the amount transmitted. The utmost penalty for a company engaged in a tax evasion system will attract a 60 percent of the amount owed (Burnet, 2012). Closing tax loop holes in Australia According to Grudnoff, (2015) the use of different ways of reducing tax liabilities is excessively higher among people with high incomes. In this case the taxpayers in the senior tax group are 2½ times probable to make use of them than other taxpayers, and account for about 12 % spots more of the total worth of income or expenditure than they do of total taxable profits. Therefore, it is difficult to illustrate a conclusion on the implications it has for the progressive overall tax structure. Accordingly, the individual income tax structure in which minor tax rates were inferior than they are currently would aid in reducing top private rates if taxpayers in the top two income tax bracket did not benefit from tax free threshold (Hemmings et al., 2015). Reform of Taxation Government reaction to community wants needs a strong financial support foundation. Preferably, states have self-sufficiency and a stable revenue support to their spending (Bradica, 2013). This allows states to act in response to shifting economic circumstances and community needs. For example, governments have better ability to take action to the current economic recession if they had independence over revenue sources that met their expenditure wants (Cao et al., 2015). Conversely, governments are forced in finding basis of future profits to reduce their dependence on the Commonwealth and secure a strong revenue base to plan and empower in key government services. In the deficiency of collaborative change, government’s lack of fiscal independence will continue to be a permanent feature of Commonwealth-State financial relations. A tax reform delivers major reimbursement for the Australian people. This provides an improved economy, a fair share of taxation and low costs for taxpayers that sustains delivery of services to all Australian government with a strong revenue foundation that will finance these services (Wei et al., p.511). Conclusion The Australian tax system has relatively achieved clear distinction involving tax preparation, illegal tax evasion, and illegitimate tax avoidance after the need for a radical transformation in the system (Cao et al., 2015). There will always be those taxpayers who will challenge to avoid all tax and Australia has a lengthy period to encourage taxpayers that they should all pay their fair share of tax. The ATO asserts that these approaches are a keystone in respect for the law and a steady culture that hold our civilized society. Australian citizens are progressively more ready to know that avoidance and evasion are not victimless actions but the tax system belong to the community (Borrego et al., 2015). Reference list Borrego, Ana Clara, Ern Chen Loo, Cidália Maria Mota Lopes, S. Ferreira, and Carlos Manuel. "Tax professionals’ perception of tax system complexity: Some preliminary empirical evidence from Portugal." eJournal of Tax Research 13, no. 1 (2015): 338-360. Bradica, Anthony, and Andrew Carter. "Budget measures to close tax loopholes." (2013): 435. Burnett, Chloe. "Part IVA that Goes the Other Way; the Rule against Double Taxation, A." Austl. Tax F. 27 (2012): 467. Cao, Liangyue, Amanda Hosking, Michael Kouparitsas, Damian Mullaly, Xavier Rimmer, Qun Shi, Wallace Stark, and Sebastian Wende. The Treasury, Australian Government, 2015. Damayanti, Theresia Woro, T. Sutrisno, Imam Subekti, and Zaki Baridwan. "The Role of Taxpayer’s Perception of the Government and Society to Improve Tax Compliance." Accounting and Finance Research 4, no. 1 (2015): p180. New York. Grudnoff, Matt. "Closing the tax loopholes." (2015). Hemmings, Philip, and Annamaria Tuske. "Improving Taxes and Transfers in Australia." (2015). Sloan, J. "Superannuation tax system needs to be simplified', The Australian, 24 February 2015, accessed 25 July 2015." (2015). Wei, Guihe, and Chuhui Liao. "Empirical research about taxpayers' behavior influence on individual income tax levying and collection." In Information Management, Innovation Management and Industrial Engineering (ICIII), 2012 International Conference on, vol. 3, pp. 511-514. IEEE, 2012. Read More