Showing posts from November, 2011

And consolidation makes three...

The Federal Government’s announcement last week (in the media killing-zone that is Friday afternoon) that it plans to introduce retrospective legislation to reverse consolidation tax laws rolled out only last year, further erodes the integrity of the tax system.

The Government’s announcement of yet another retrospective change to tax laws is extremely disappointing. It serves to further undermine the principles on which the tax system is based.

A fundamental principle of the legislative process is that laws which adversely affect taxpayers should not apply retrospectively except in extremely rare situations, such as addressing significant tax avoidance. This is not the case with these changes.

Taxpayers enter into transactions on the basis of the law as it is, not the law as it is rewritten after transactions have occurred. Retrospective changes in tax law are likely to interfere with bargains struck between taxpayers who have made every effort to comply with the prevailing law as …

A transfer pricing overhaul but with more retrospective law changes

The Government's 1 November announcement of an overhaul of transfer pricing laws came as a great surprise to many, including transfer pricing specialists. Since the SNF case, practitioners had expected legislative change but had not expected it to arrive in quite so dramatic a fashion.

To start the onslaught was of course the announcement that the Government would be amending the law (from 1 July 2004) to "clarify that transfer pricing rules in our tax treaties operate as an alternative to the rules currently in the domestic law".

Many taxpayers and tax practitioners who had taken the view that our double tax treaties are a shield, not a sword, may be unpleasantly surprised by any increase in tax payable as a result of this change. Taxpayers that face such an increase will be hoping that the ATO will at least assist in negotiating with overseas revenue authorities in relation to the resulting instances of double taxation.

These issues and more were discussed at a meeting of…

The Green light for carbon pricing

This week the Australian Government successfully passed the Clean Energy legislative package through the Parliament. Whether you call it a ‘carbon tax’ (which it isn’t, despite the Government describing it as such) or a ‘carbon price’, the changes will have economy-wide effects. They also reinforce the public perception that the Greens are a powerful political force in the finely balanced minority Government.

Will the Greens succeed in harnessing the momentum of the carbon package to end the use of fossil fuels and halt coal seam gas extraction? Or will the Opposition succeed in gaining a mandate from the electorate to implement its ‘pledge in blood’ to repeal the legislation?

What is certain is that barring an early election, a carbon price will apply to the 500 largest polluters from 1 July 2012, moving to an emissions trading scheme in 2015. The cost impact on consumers will be either fully, partially, or not at all offset through the tax and transfer system. Low-income househ…