Tax Policy Future Shock - Melbourne Institute · 2017. 1. 25. · Tax Policy Future Shock:...
Transcript of Tax Policy Future Shock - Melbourne Institute · 2017. 1. 25. · Tax Policy Future Shock:...
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Tax Policy Future Shock: Arrivederci good tax design?
Neil WarrenAustralian School of Taxation (Atax)
Faculty of LawUniversity of NSW, Sydney 2052
email: [email protected]
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THE CHALLENGE• “If anything in life is constant, it is change” –
Welcome to tax!• Review and renew – and tax is no exception• This paper looks:
– Back and asks, what were the challenges over the past decade; and
– Forward and asks what will be the challenges of the future
– How will these new challenges impact on future tax reforms?
– What will all this do for good tax design?
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CHALLENGES PASTWhen Issue
- 10 YEARS •Internet•Limits to PIT
-5 YEARS Threats to PIT ⇒Tax havens; SVC
0 YEARS •Environment ⇒ Excise, EMTS, congestion, Road user charges •Limits to GST/VAT
+10 YEARS NETWORKS!!
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FUTURE CHALLENGES
• Networks– Cultural (social)– Technology base
• Challenge– Loss of 3rd party reporting
(eg banks/ employers/ service providers..)
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NETWORKS - CULTURAL• International • Intra-national• Threats
– Basic tax concepts• residency; pricing; PE
– Data integrity• Loss of 3rd party reporting
– non-observed economy (and tax gap)
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NETWORKS - CULTURAL
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• e-World– cheap and easy access to:
global trade opportunitiesglobal workplace and shoppingglobal investment and banking
– improved information flow ⇒ improved economic efficiency
– disintermediation ⇒ increased competition with minimal barriers to trade
• Virtual world – SecondLife.com; EntropiaUniverse.com/ MissBimbo.com etc
NETWORKS - TECHNOLOGICAL
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THE CHALLENGE!• to economies ⇒ tax competition, tax gap, informal
networks• to individuals ⇒ global labour market and investment
opportunities• to business ⇒ informal networks; global market
opportunities• to governments, it is
– a major threat to tax revenue collecting agencies– beyond their physical control– but a potentially major boost to domestic economies
through increased trade.• to tax administrators
– Information flows ⇒ multilateralism– Concepts ⇒ residency; sales or royalties; pricing; PE
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…to tax design?FEDERAL
– Personal Income Tax – vulnerable, sensitive– Company income tax – network vulnerable– GST – fraud exposure
STATES– Payroll Tax – marginal exposure– Property based taxes – possible saviour– financial taxes – already lost…– gambling taxes – highly exposed– Service taxes (eg Insurance) - exposed
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..so what if we admit defeat ? A TAX-WHAT-YOU-CAN SYSTEM
• Income, consumption and wealth taxes would all need to be rethought
• Residence based taxes – rather than source based
• Tax tangibles – not intangibles• Schedular income taxes• Multiple rate GST with rates determined by
country of residence (eg EU model)• Data flow taxes?
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or the less desperate alternative!• Income taxes
– PIT: ⇒ rate reduction; flat tax regimes; dual income taxes; reduced capital taxation
– Corp Income tax: from imputation to classical– Administrative changes ⇒ trend towards withholding taxes,
pre-population; information exchange • Consumption Taxes
– Origins principle VAT; reverse charge rule• Why?
– Increased tax competition between jurisdictions– Increased incentives for investment, risk taking,
entrepreneurship and for work– Increased demands on government for expenditure.⇒ …so still a focus away from equity to economic efficiency
and simplicity
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ARRIVEDERCI GOOD TAX DESIGN• Potential changes will
⇒Do little to improve equity⇒Could improve simplicity⇒Will improve efficiency⇒Will favour owners of mobile resources
whether they are skilled labour or capital• Tax administrators task will be much
harder, so…
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Where to now?International cooperation
Multilateral tax treaties with tough enforcement and information sharing
Global Tax File Numbers (and GTO)
Acceptance of one size does not fit all!
……