In: Accounting
You are about to enter the tax profession. Your future employer Tax Advice and Policy Services (TAPS) has stressed the importance of being able to clearly and professionally structure and present ideas, judgements and opinions. TAPS has informed you that in your new role, you could be expected to brief a wide audience including the Australian Tax Office, Treasury, international corporate taxpayers, and small business owners. TAPS is concerned that you may not fully understand the complexity of the taxation regime and the additional complications that COVID-19 has introduced to the fiscal system.
Fortunately, during your time at QUT you studied advanced tax law where the real world came to you and you heard from nine senior tax experts from around the world. Each were interviewed throughout your unit, sharing their insights into current problems and future challenges in tax.
TAPS has advised you that on your first day, you will be asked to prepare an internal briefing note to be circulated among the partners. This briefing note will be used to determine what section of the firm you are placed into. As part of that briefing note, you are asked to address the following:
e) What is one specific thing you would add to Australia’s tax system and why?
I would like to add Missing Tax Treaties to Australia’s tax system
Tax Treaties provide tax benefits to Individuals/firms/companies etc who earn from both the countries.
Tax Treaties with more countries would bring foreign investment into the country as it will clear them with respect to tax benefits.
Reaching to large number of countries is the goal so that it helps in building relation with the countries.
Tax treaties are a critical part of the global economy. There are more than 3,000 bilateral tax treaties in effect, most of which are based on models from the Organisation for Economic Co-operation and Development and the United Nations. They’re essentially agreements between two countries that allow individuals and corporations to avoid the double taxation of income.
Tax treaties can be used in countless situations, from calculating the home- and host-country income taxes of expatriate workers to determining whether a multinational corporation has created a taxable presence in a jurisdiction.
When a corporation benefiting from a tax treaty when financing a cross-border acquisition. This may seem like a narrow subject, but it’s an important one that affects many multinational organizations. Cross-border acquisitions continue to be an enormously popular way of achieving corporate growth. 2019 was the fourth-highest year on record for M&A volume, with $3.8 trillion in deal value announced globally, despite the economic uncertainties caused by Brexit and the U.S.-China trade war.
Obviously, financing cross-border M&A deals in an efficient, compliant manner is in the best interest of the acquirer. The application of tax-treaty benefits in this area can result in significant cost savings and should always be considered. Indeed, tax treaties can be seen as one leg in a three-legged stool supporting informed corporate tax structuring, with the other stools being applicable domestic codes (such as IRS regulations) and tax-related domestic court rulings. Tax treaties are a unique element in this example, as the “tax-treaty leg” is the only one involving multiple countries. It should be emphasized, however, that tax treaties in general have provisions limiting benefits that are often overlooked.