Tax Avoidance Causes and Solutions CORE

Tax Avoidance Causes And Solutions Core-Free PDF

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Table of content,1 0 Introduction 3,1 1 Background Overview 3. 1 2 New Zealand tax system 4,1 3 New Zealand Tax Policy 6. 1 4 History of New Zealand income tax 6,1 5 Tax avoidance in New Zealand 7. 1 6 Structure of the thesis 8,2 0 Defining tax avoidance 9. 2 1 Modeling tax avoidance accounting analysis 10,2 2 Income splitting 13.
2 2 1 Description 13,2 2 2 Case law 14,2 3 Conversion 16. 2 3 1 Description 16,2 3 2 Case law 17,2 3 Deferral 18. 2 3 1 Description 18,2 3 2 Case law 18,3 0 Current New Zealand approach 19. 3 1 Overview 19,3 2 Form approach 20,3 3 Shams 22,3 4 Section BG 1 Income Tax Act 2004 23. 4 0 Options for prevention of tax avoidance 24,4 1 Judicial administrative rule 24.
4 2 Specific anti avoidance rules 26,4 3 General anti avoidance provision 27. 5 0 Judicial administrative rule 28, 5 1 Examples of judicial and administrative rule 28. 5 1 1 United States 28,5 1 2 United Kingdom 29,5 1 3 France 30. 5 1 4 China 31,5 2 Designing rule for New Zealand 31. 6 0 Legislative specific rules 33,6 1 New Zealand 33.
6 2 Other jurisdictions 39,7 0 Legislative general anti avoidance rule 41. 7 1 New Zealand 41, 7 1 1 History of general anti avoidance provisions 41. 7 1 2 Overview of section BG1 42,7 1 3 Concept of Arrangement 45. 7 1 4 Tax avoidance 48,7 1 5 The Choice Doctrine 56. 7 1 6 Reconstruction 58,7 1 7 Recent developments 60.
7 2 Other jurisdictions 65,7 2 1 Australia 65,7 2 2 Canada 74. 8 0 Recommendation and Conclusion 76,8 1 Tax system 76. 8 2 Administrative rules 78,8 3 Legislative rules 78. 8 3 1 Specific anti avoidance provision 78,8 3 2 Generally anti avoidance rule 79. 8 4 Interpreting the law 80,8 5 Conclusion 80,Bibliographic 82.
Attestation of Authorship, I hereby declare that this submission is my own work and that to the best of my knowledge. and belief it contains no material previously published or written by another person except. where explicitly defined in the acknowledgements nor material which to a substantial. extent has been submitted for the award of any other degree or diploma of a university or. other institution of higher learning,Zhang Ling Becky. Acknowledgements, I would like to take this opportunity to thank Professor Chris Ohms who provided. invaluable guidance throughout the research process and also my family for their sacrifices. support and love, Tax avoidance is attracting more and more attention from the public Different people have. different understanding and definitions of tax avoidance The purpose of this thesis is to. review the causes of and solutions to tax avoidance The thesis assesses various definitions. of tax avoidance and then discusses different options for prevention of tax avoidance In. discussing of legislative rules the thesis reviews the various applicable sections in the New. Zealand Income Tax Act 2004 taking into account of leading cases discusses the. development in other jurisdictions and in particular examines the development of. Generally Anti avoidance Rules in three jurisdictions The thesis recommends the key. elements for design a good tax system which will help to restrict the conditions that make. tax avoidance possible for the future development The recommendations also include. establishing effective disclosure and advanced rulings system improving specific anti. avoidance provision reinforcing generally anti avoidance rule and developing a purposive. interpretation of the law,1 0 Introduction, The purpose of this thesis is to critically review and analyse the causes and solutions of tax.
avoidance The thesis reviews the relevant sections of the Income Tax Act taking into. account of leading cases discusses the development in other jurisdictions and makes. recommendation for the future development,1 1 Background Overview. The original concept of taxation was raising revenue for subsequent expenditures by the. ruling authority The government financing through taxation has a fundamental influence. on the standard of living of all citizens This was recognised by New Zealand s Ross report. on tax reform in 1967 Taxation to pay government to provide non market goods and. services regulate economic and social conditions redistribute income 1. In the modern society to accomplish the development of political and economic structure. of society has become more complex The government responsibilities increased as well. As a consequence taxation now serves far wider purposes However taxation continues. rising of revenues and remains the primary source of the income required by the state to. ensure the protection social welfare and prosperity of its citizens 2. The Figure 1 below is the analysis for source of New Zealand government income in 2005. From the figure we can see the revenue form taxation provides over 90 total income of. the New Zealand The three key tax types are income tax 62 of revenue GST 20. of revenue and other indirect taxes including excise taxes on tobacco alcohol and petrol. 10 of revenue Taxation is still a main source of government financial and as a wide. impact on the economic social and political stability and well being of a nation. The Tax Review 2001 Final Report Wellington 2001, Taxation Review Committee Taxation in New Zealand Report of the Taxation Review Committee. Wellington 1967,Figure 1 Crown finance3,Source of current income 2005. million Percentage,Income taxes 32067 62 36,Net goods and services tax 10 686 20 78. Other taxes 5 002 9 73,Property income 2 179 4 24,Other income 1 490 2 90.
Total 51 424 100 00,1 2 New Zealand tax system, Current New Zealand tax system is a result of a series of significant reformation in the past. twenty years The 1982 McCaw Report was the start point for this series of reformation in. the report McCaw concluded that the tax system needed a major overhaul In the time of. that report New Zealand tax system was characterised by narrow bases high tax rates and. a heavy dependency on income tax 4, The reformation introduced GST in 1986 and broadened income tax base to introduce FBT. accrual rules international tax rules and removal or reduction of corporate tax concessions. The reform allowed a better and more sustainable balance in the tax mix to be achieved 5. In particular there has been a decreasing reliance on income tax and an increased role for. consumption taxes From the time McCaw Report was released as the income tax base has. broadened and the top marginal tax rate was reduced from 66 to 39 6. Now the tax base in New Zealand comprises both direct and indirect tax systems 7 The. Income Tax Act 1994 imposes an income tax while the Goods and Services Tax Act 1985. Statistics New Zealand New Zealand in Profile 2006 Wellington 2006. McCaw Committee Report of the Task Force on Tax Reform Wellington 1982. The Tax Review 2001 Final Report Wellington 2001, relates to the indirect consumption expenditure goods and services tax Both of these taxes. are integral to the revenue raising function of Government and maintenance of the tax. base 8 Many reform measures have been introduced over the last two decades aimed at. broadening and strengthening the tax base of both the income tax and the goods and. services tax From that time New Zealand has moved to broad bases taxes at low rate 9. Current the Inland Revenue Department administers three principle acts the Income Tax. Act 2004 the Tax Administration Act 1994 and the Goods and Services Tax Act 1985. Figure 2 is the comparison of the revenue from taxation in the last ten years From the. figure we can see the revenue from GST increased gradually for last ten years however. income taxation is still the most important component of the government tax revenue. Figure2 Revenue from taxation 10, Although there are still some work need to be done for the tax system the Tax review 2001. concluded that New Zealand s current tax mix is broadly right By having two main tax. bases overall revenue flows are relatively stable even where one or other tax base. fluctuates 11, New Zealand Treasury Budget Speech and Fiscal Strategy Report 2000 Wellington 2000.
Tax review 2001 Issues Paper Wellington 2001, Statistics New Zealand Crown Accounts Analysis Wellington 2006. The Tax Review 2001 Final Report IRD Wellington 2001. 1 3 New Zealand Tax Policy, A good taxation system should treat all people of a country equally clearly define the tax a. person should pay be convenient for both tax payer and collector and be cheap to pay and. collect tax Those canons of taxation equality certainty convenience and efficiency first. developed by Adam Smith in his 1776 book The Wealth of Nations as a set of criteria by. which to judge taxes This was comfirmed as appropriate for current government policy in. the treasurey reporter Budget 2006 which stated, The Government is also committed to a fair distribution of the tax burden and a robust tax. system where people pay their intended rates of tax. The Government will continue to promote sound administration of the tax system and clear. and effective tax rules that minimise administration and compliance costs. The Government will give consideration to the composition of taxation to meet the. government s equity and spending objectives at lowest economic cost. The Government will consider the use of tax exemptions and concessions only in the. context of the full range of policy options and only if the benefits can be shown to outweigh. the costs for New Zealand 12, The key focus of New Zealand tax policy is to enhance the overall economic well being of. New Zealanders by seeking ways to reduce the costs of imposing taxes or making the tax. system more efficient while promoting fairness and continuing to raise sufficient. revenue 13 Added to this are the goals of making the tax system as certain and simple as. possible 14,1 4 History of New Zealand income tax, The income tax system in New Zealand comprised of two important statues the Income.
Tax Act 2004 and the Tax administration Act 1994, New Zealand Government Budget 2006 Wellington 2006 P 45. Tax review 2001 Issuer Paper Wellington 2001, Inland Revenue Department Simplifying Taxpayer Requirements Wellington 1997. Direct Income tax was first imposed in New Zealand by the Land and Income Assessment. Act 1891 The 1891 Act introduce the land tax mortgages tax and income tax That Act. was amended and consolidated numerous times from 1900 to 1954 and various other types. of tax were imposed by those Acts In 1976 Parliament split the Land and Income Tax Act. 1954 into two Acts These were the Income Tax Act 1976 and the Land Tax Act 1976 In. December 1994 Parliament enacted the Income Tax Act 1994 the Tax Administration Act. 1994 and the Taxation Review Authorities Act 1994 marking the first phase in a three step. process to rewrite the Income Tax Act 1976 In May 2004 the Income Tax Act 2004. received Royal assent The Income Tax Act 2004 is the latest statute and replaces the. Income Tax Act 1994 15,1 5 Tax avoidance in New Zealand. Tax avoidance is a problem facing by all the tax system especially for a higher tax rate. country such as New Zealand The 33 rate is well above average rates in the Asia Pacific. region and for OECD countries The average rate in the Asia Pacific region is 29 99 and. the OECD average rate has fallen from 28 55 to 28 31 16 The purpose of taxation is to. generate revenue for government However the high tax rate may create a large incentive. for enough motivations to pay less tax, It is accepted that taxpayers can organize their affairs to minimize their taxes In IRC v. Duke of Westminster 17 a case which is the most notable judicial approval Lord Tomlin. Every man is entitled if he can order his affairs so that the tax attracting under the. appropriate Acts is less than it would otherwise be If he succeeds in ordering them so as to. secure this result then however unappreciative the Commissioners of Inland Revenue or. his fellow taxpayers may be of his ingenuity he cannot be compelled to pay the increased. In New Zealand tax avoidance and tax evasion are entirely different concept In Peterson v. C of IR 18 Lord Bingham of Cornhill and Lord Scott of Foscote stated at p 19 114 Para 60. KPMG The 2006 Corporate Tax Rate Survey 2006, The line to be drawn between tax evasion and tax avoidance is clear enough The former.
is criminal The latter is not It may be socially undesirable but it is within the letter of the. There are legislative rules framed by the government to prevent the possible tax avoidance. New Zealand tax legislation contains numerous anti avoidance provisions for preventing. the possible problem These provisions can be divided into two categories specific anti. avoidance provisions and the general anti avoidance provision. Specific anti avoidance provisions are directed to particular defined situations with nature. narrowly focused whereas the general anti avoidance provision through sBG1 of the. Income Tax Act 2004 has raised a general anti avoidance yardstick by which the line. between legitimate tax planning and improper tax avoidance is to be drawn 19 Section BG1. is perceived legislatively as an essential pillar of the tax system designed to protect the tax. base and the general body of taxpayers from what are considered to be unacceptable tax. Now the tax base in New Zealand comprises both direct and indirect tax systems 7 The Income Tax Act 1994 imposes an income tax while the Goods and Services Tax Act 1985 3 Statistics New Zealand New Zealand in Profile 2006 Wellington 2006 4 McCaw Committee Report of the Task Force on Tax Reform Wellington 1982

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