10 th anniversary of the chamber of tax advisers russia international tax congress marriott grand...

10th Anniversary of The Chamber of Tax Advisers Russia

International Tax CongressMarriott Grand Hotel, Moscow

2 & 3 February 2012

Mr Gil Levy – President Asia-Oceania Tax Consultants’

Association

1. AOTCA – INTRODUCTION

• HISTORY

• PURPOSE

• RECENT ACTIVITIES

2. THE TAXPAYERS CHARTER

• JOINT VENTURE AOTCA, STEP, CFE

• RESPONSE TO ‘GLOBALISATION’ OF REVENUE AUTHORITIES

• IMPETUS – CFE’s 50TH ANNIVERSARY PUBLICATION OF TAXPAYERS' RIGHTS IN THE EU AND AUSTRALIAN TAXPAYERS CHARTER

• QUESTIONNAIRE 50 COUNTRIES

3. AREAS COVERED

• EXISTING TAXPAYERS CHARTER

• TAX ADMINISTRATION IN GENERAL

• TAX FILINGS

• ASSESSMENTS

• AUDITS

• APPEALS ASSISTANCE

3. AREAS COVERED (continued)

• SERVICE STANDARDS

• RULINGS AND INTERPRETATIONS

• TAXPAYER RECORD

• CONFIDENTIALITY PRIVACY

• DEALING WITH THE TAX ADMINISTRATION

• BURDEN OF PROOF

3. AREAS COVERED (continued)

• DRAFTING LEGISLATION

• RETROSPECTIVITY

• DOUBLE TAXATION

• INTEREST AND PENALTIES

• DEVELOPMENT OF TAX LAWS

4. CHARTER DEALS WITH RIGHTS AND OBLIGATIONS

5. SHOULD BE LEGALLY BINDING

AUSTRALIA ASPIRATIONAL

6. APPLIES TO ALL TAXES

7. END GOALS

• WORLD WIDE STANDARD

8. TRENDS IN TAX POLICY – AUSTRALIA

• LATEST REVIEW KNOWN AS THE HENRY REVIEW – AUSTRALIA’S FUTURE TAX SYSTEM

• “ROOT AND BRANCH” REVIEW – SOMEWHAT ASPIRATIONAL

8. TRENDS IN TAX POLICY – AUSTRALIA (continued)

• NEW AGE THINKING – RECOMMENDATIONS

§ 40% DISCOUNT IN RATE OF TAX ON SAVINGS

§ ELIMINATE WITHHOLDING TAX ON FINANCIAL INSTITUTIONS OPERATING IN AUSTRALIA

§ REDUCE THE RATE OF TAX ON SUPERANNUATION FUND EARNINGS FROM 15% TO 7.5%

§ 40% RESOURCES SUPER PROFITS TAX ON THE MINING INDUSTRY (This has been taken up – but may not last)

9. OTHERS

5. BUSINESS LEVEL EXPENDITURE

6. REPLACE DIVIDEND IMPUTATION WITH A SHAREHOLDER TAX I.E. ON DIVIDEND

7. BROAD BASED CASH FLOW TAX DESIGNED ON A DESTINATION BASIS

10.THE TRADITIONAL APPROACH

• BROAD-BASED / LOW-RATE• AUSTRALIA 1980’s CGT, FBT TAX ON SUPERANNUATION

CONTRIBUTIONS CFC AND FIF• THE LOWER THE RATE THE LESS EFFECT TAX HAS ON

INVESTMENT DECISIONS

• ALL TREATED EQUALLY IF INCENTIVES ELIMINATED• REVIEW RECOMMENDS REMOVAL OF EXEMPTION ON

FOREIGN EARNED INCOME, TAX SUPER CONTRIBUTION STRENGTHEN PERSONAL SERVICES INCOME RULES.

11.THE NEW WAVE

• BROAD BASED DOESN’T MINIMISE ECONOMIC DISTORTIONS

• ECONOMIC DISTORTIONS DEPEND ON MARGINAL ELASTICITY'S

• DIFFERENTIATION MAY BE PREFERABLE

12.EXAMPLES

• TOP PERSONAL RATE SHOULD BE ZERO

• INCOME TAX IS A TAX ON CONSUMPTION WHAT IS SPENT BECOMES EARNINGS. TAXING INCOME FROM SAVINGS IS DOUBLE TAX WHEN SAVINGS ARE SPENT

• TAXING SAVINGS INCOME LEADS TO OVER CONSUMPTION IN EARLIER PERIOD

12. EXAMPLES (continued)

•DIFFERENTIATING TAXES BETWEEN MALES AND FEMALES – FEMALE TAX RATES SHOULD BE LOWER

•TAX OWNER OCCUPIED HOMES MORE AFFORDABLE FOR YOUNGER FAMILIES US EXPERIENCE

13.CORPORATE TAX

• ALLOWANCE FOR CORPORATE EQUITY o ELIMINATES DISTINCTION BETWEEN FINANCING BY

WAY OF DEBT OR EQUITY

• CASH FLOW CORPORATE TAXo REAL CFCT – TAX ALL REAL RECEIPTS AND ALLOW

DEDUCTION FOR ALL EXPENDITURE – INTEREST IS NON DEDUCIBLE NON-ASSESSABLE

13.CORPORATE TAX (continued)

• A CFCT AND ACE IMPLIES ONLY ECONOMIC RENTS WILL BE TAXED

• CORPORATE TAX CAN BE DEFERRED INDEFINITELY BY RE-INVESTMENT OF PROFITS IN ASSETS AND IS PRO-GROWTH

13.CORPORATE TAX (continued)

ALTERNATIVE

• CFCT INCLUDING ALL OUTFLOWS AND INFLOWS THEREFORE ONLY TAX INCREASE IN EQUITY

• DIFFICULT TO INTEGRATE WITH OTHER INCOME TAX JURISDICTIONS

14.COMPARISON – EXAMPLES

INCOME TAXBORROWING $100PRICE $100INCOME $10 X 10 $100INTEREST EXPENSE $10 X 10 ($100)SALE PROCEEDS $100TAX BASE NILTAX @ 30% NIL

IF FUNDED BY EQUITYTAX BASE $100TAX @ 30% $ 30

UNDER ACE EQUITY DEDUCTION WOULD BE $100 THUS REDUCING TAX BASE TO NIL

ALTERNATIVE UNDER CFCT RESULT THE SAME

SUBSCRIBED CAPITAL $100COST OF ASSET ($100)INCOME $10 X 10 $100TAX BASE NILTAX @ 30% NIL

THIS IS WHY CFCT IS CALLED AN EXPENDITURE TAX

15.AUSTRALASIAN IMPUTATION SYSTEM

• CORPORATE TAX ONLY A WITHHOLDING TAX

• AN EXCESS TAX AT CORPORATE LEVEL IS REFUNDED

• NON-RESIDENTS AFFECTED