Question

1.why tax havens will survive?

critically analyze the reasons for the above question in the context of the approaches to tax havens by australian and the US.

2.

You are required to critically evaluate the following statement pertaining to the operation of international tax system. In doing so, explain briefly whether or not you agree with the statement and the reasoning that underpins your view.

“Tax avoidance is a problem for every country. China is making every efforts to unify Chinese Double Tax Agreements and the emphasis on General anti-avoidance rules”

Answer 1

1.

Australia has ranked 48th in the latest list of global tax havens, with the nation “undoubtedly” hosting significant quantities of illicit funds.

But while the country ranks relatively low on the Tax Justice Network’s 2020 Financial Secrecy Index, the United States has overtaken Switzerland as a global tax haven, and the Cayman Islands is still the worst offender.

Over the course of 2019, the Cayman Islands increased the volume of financial services it provides to non-residents by 21 per cent, and the US increased its supply of financial secrecy to the world by 15 per cent.

Panama, the source of 11.5 million leaked documents in 2015 that exposed a huge system of tax evasion among the world’s elite, sat 15th on the index.
Tax Justice Network chief executive Alex Cobham said while polls show people in the US and the UK favour greater transparency when it comes to tax, governments have taken their feet off the pedal.

“It is deplorable, however, that in the face of this progress, an Anglo-American axis of secrecy has actively chosen to double down on the practices that exacerbate corruption, tax abuse and global inequalities,” Cobham said.

US companies rorting the tax system
While the US has surged past Switzerland as a tax haven for non-residents, American companies also take advantage of the country’s lenient tax policies introduced by the Trump administration back in 2018.

The Tax Cuts and Jobs Act took lowered the corporate tax rate from 35 per cent to 21 per cent – but companies like Amazon have still gotten away with paying next to nothing in federal income taxes.

In fact, in 2018, Amazon literally paid $0 in federal income taxes.

Last year, the company paid US$162 million in income tax - which is an effective tax rate of just 1.2 per cent on its US$13 billion profits.

And Amazon isn’t alone.

According to the Institute on Taxation and Economic Policy, sixty Fortune 500 companies did not pay federal income tax in 2018 – three times more than the number of companies that did not pay corporate taxes between 2008 and 2015.

In Australia, Google and Amazon paid around 3 per cent of their revenue in corporate tax, compared to the nation’s 30 per cent corporate tax rate.

Netflix is not dissimilar, with the company paying just over $341,000 in tax in Australia despite raking in between $600 million and $1 billion from local subscribers.

The company’s corporate structure reportedly allows a Netherlands-based subsidiary to bill its customers, which incurs a Dutch tax rate that’s much lower than Australia’s.

2.Multinational corporations have long avoided paying their full share of taxes. It’s a situation that infuriates many Americans — the idea that a large corporation can avoid paying its full tax obligation simply by parking profits in an offshore tax haven. The cost is significant, though, and it’s estimated that such profit shifting now costs the U.S. Treasury roughly $80 billion annually.

This section aims to explain how to allocate tax liability on the taxpayer’s profits from operating business and all income derived from immovable property, investment and alienation of property between Hong Kong and China in relation to “Arrangement between the Mainland of China and the Hong Kong Special Administrative Region for the Avoidance of Double Taxation and the Prevention of Fiscal Evasion with respect to Taxes on Income” (“the Comprehensive Arrangement”). The Comprehensive Arrangement was signed on 21 August 2006 and came into effect in Hong Kong on or after 1 April 2007 whereas in China on or after 1 January 2007.

Taxpayers from the two regions are still required to comply with the tax regulations in their respective area. The enterprises in China should be taxed in China, yet, for those carrying business in Hong Kong for a permanent establishment, they may be taxed in Hong Kong but it has to depend on how attributable they are in the region. The same case applies in Hong Kong. The enterprises in Hong Kong should be taxed in Hong Kong, yet, for those carrying business in China for a permanent establishment, they may be taxed in China but it has to depend on how attributable they are in the region. In Hong Kong, the assessable profits of a corporation will be calculated in line with the generally accepted accounting principles (GAAP) under the Inland Revenue Ordinance.