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10 th Anniversary of The Chamber of Tax Advisers Russia International Tax Congress Marriott Grand Hotel, Moscow 2 &amp

10 th Anniversary of The Chamber of Tax Advisers Russia International Tax Congress Marriott Grand Hotel, Moscow 2 & 3 February 2012. Mr Gil Levy – President Asia-Oceania Tax Consultants’ Association. AOTCA – INTRODUCTION HISTORY PURPOSE RECENT ACTIVITIES. THE TAXPAYERS CHARTER

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10 th Anniversary of The Chamber of Tax Advisers Russia International Tax Congress Marriott Grand Hotel, Moscow 2 &amp

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  1. 10th Anniversary of The Chamber of Tax Advisers RussiaInternational Tax CongressMarriott Grand Hotel, Moscow2 & 3 February 2012 Mr Gil Levy – President Asia-Oceania Tax Consultants’ Association

  2. AOTCA – INTRODUCTION • HISTORY • PURPOSE • RECENT ACTIVITIES

  3. 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

  4. AREAS COVERED • EXISTING TAXPAYERS CHARTER • TAX ADMINISTRATION IN GENERAL • TAX FILINGS • ASSESSMENTS • AUDITS • APPEALS ASSISTANCE

  5. AREAS COVERED (continued) • SERVICE STANDARDS • RULINGS AND INTERPRETATIONS • TAXPAYER RECORD • CONFIDENTIALITY PRIVACY • DEALING WITH THE TAX ADMINISTRATION • BURDEN OF PROOF

  6. AREAS COVERED (continued) • DRAFTING LEGISLATION • RETROSPECTIVITY • DOUBLE TAXATION • INTEREST AND PENALTIES • DEVELOPMENT OF TAX LAWS

  7. 4. CHARTER DEALS WITH RIGHTS AND OBLIGATIONS

  8. SHOULD BE LEGALLY BINDING AUSTRALIA ASPIRATIONAL

  9. 6. APPLIES TO ALL TAXES

  10. END GOALS • WORLD WIDE STANDARD

  11. TRENDS IN TAX POLICY – AUSTRALIA • LATEST REVIEW KNOWN AS THE HENRY REVIEW – AUSTRALIA’S FUTURE TAX SYSTEM • “ROOT AND BRANCH” REVIEW – SOMEWHAT ASPIRATIONAL

  12. 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)

  13. OTHERS • BUSINESS LEVEL EXPENDITURE • REPLACE DIVIDEND IMPUTATION WITH A SHAREHOLDER TAX I.E. ON DIVIDEND • BROAD BASED CASH FLOW TAX DESIGNED ON A DESTINATION BASIS

  14. 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.

  15. THE NEW WAVE • BROAD BASED DOESN’T MINIMISE ECONOMIC DISTORTIONS • ECONOMIC DISTORTIONS DEPEND ON MARGINAL ELASTICITY'S • DIFFERENTIATION MAY BE PREFERABLE

  16. 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

  17. 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

  18. CORPORATE TAX • ALLOWANCE FOR CORPORATE EQUITY • ELIMINATES DISTINCTION BETWEEN FINANCING BY WAY OF DEBT OR EQUITY • CASH FLOW CORPORATE TAX • REAL CFCT – TAX ALL REAL RECEIPTS AND ALLOW DEDUCTION FOR ALL EXPENDITURE – INTEREST IS NON DEDUCIBLE NON-ASSESSABLE

  19. 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

  20. CORPORATE TAX (continued) ALTERNATIVE • CFCT INCLUDING ALL OUTFLOWS AND INFLOWS THEREFORE ONLY TAX INCREASE IN EQUITY • DIFFICULT TO INTEGRATE WITH OTHER INCOME TAX JURISDICTIONS

  21. COMPARISON – EXAMPLES INCOME TAX BORROWING $100 PRICE $100 INCOME $10 X 10 $100 INTEREST EXPENSE $10 X 10 ($100) SALE PROCEEDS $100 TAX BASE NIL TAX @ 30% NIL

  22. IF FUNDED BY EQUITY TAX BASE $100 TAX @ 30% $ 30 UNDER ACE EQUITY DEDUCTION WOULD BE $100 THUS REDUCING TAX BASE TO NIL

  23. ALTERNATIVE UNDER CFCT RESULT THE SAME SUBSCRIBED CAPITAL $100 COST OF ASSET ($100) INCOME $10 X 10 $100 TAX BASE NIL TAX @ 30% NIL THIS IS WHY CFCT IS CALLED AN EXPENDITURE TAX

  24. AUSTRALASIAN IMPUTATION SYSTEM • CORPORATE TAX ONLY A WITHHOLDING TAX • AN EXCESS TAX AT CORPORATE LEVEL IS REFUNDED • NON-RESIDENTS AFFECTED

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