Thieving ATO targets Paul Hogan

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The Australian Tax Office has scaled up its extortion racket by extracting accusations by a tax advisor to Paul Hogan and John Cornell. Why do I say this? It has long been the practice of the ATO to target high-profile, wealthy Australians who clearly don't believe in paying excessive taxes to support regimes they don't believe in. One cannot say what justification Hogan & Cornell had for minimising taxation. I can only say that any law based on extortion, unconditional and 'initiated' coercion, whether it is the arbitrary law of a 'representative' government or some mob, is still theft. There is no moral legitimacy behind the law, and the fact that it is a 'tyranny of the majority' who condemn these men because of their own cynical acceptance of slavery, in no way admonishes them. Slavery is bad for everyone. Unconditionally funding government results in the worst form of public administration.

Send a message to the ATO that you do not support persecution of wealthy Australians for the sake of its self-serving power plays. Does anyone remember the efforts the government went in pursuit of Rene Rivkin. In the meantime, you can't even get the govt to look at disclosure issues. This is where it should be focused. Fraud and disclosure - to protect the legitimate interests of Australians...not stealing money from those who have 'made it'....why? Because they have more than you.

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Author Andrew Sheldon| Applied Critical Thinking | www.SheldonThinks.com

Global tax rates by type

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There are those countries which have something to promote when it comes to taxation. Consider Hong Kong. In the Asia-Pacific region it has the most forgiving tax regime. You can see a list of the taxes levied by country at the Invest HK website. I would caution you however these are other factors to consider - for instance:

1. Sovereign risk - HK is Chinese controlled so things might change. The same goes for any government, and some governments are prone to be more predictable than others, as Australia's Kevin Rudd is proving.

2. Your context - Depending on why you need a company in another country. Will it be an expense/cost centre, a revenue centre, an investment holding company, etc. Different countries treat different things differently. i.e. If its a holding company then a Goods & Services tax is not going to make a lot of difference.

Kind of amazing how some countries can support their economies on so little tax isn't it. Makes me wonder why you decide to pay so much. Oh that's right, you're a slave. You forgot. I guess you thought there needed to be a gun pointed at your head before you were defined as a slave. No, there just needs to be the threat of a gun pointing at your head, or the prospect of having your money siphoned from your bank account, or a tax office appointed debt collector taking possession on your home. Guns are so old fashion when you have an 'unrepresentative' democracy to destroy your freedoms. Don't get me wrong the idea of a representative democracy convened by you people scares me more. Give me consensus based democracy anytime.

3. The accuracy of the information - Forbes is the source of this information, and a reader suggests the numbers for France are wrong.

4. The information context - As a reader suggested, US might have lower taxes than Europe, but they have less complicated tax system, i.e. state & local taxes, etc.

If you think about this chart a bit you might just come up with a 'freedom strategy', or tax minimisation strategy if you prefer.

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Andrew Sheldon www.sheldonthinks.com

What are the chances of being caught for tax evasion

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If one observes the way the government works its that they like to make examples of people, particularly high profile people. I am reminded of Rene Rivkin, a high flying, very successful trader and stockbroker, who was caught breaching the insider trading regulations covering stock trading. Of course everyone would engage in insider trading if they could, or if they had the opportunity. It goes without reason. Why would you not try to profit from information if you did not harm someone to obtain it.
I can assure you that the armies of brokers working in the stock market engage in stock trading. This is how brokers do it according to a person I know who works in the backoffice of a broking house. The ‘house’ funds’ are used. These are client funds held by the brokers to cover positions. This approach allows the broker to conceal the identity of the trader. This is easy because your inside information allows you to recommend the stock to your clients. The other opportunity is by using offshore bank accounts, which are difficult for governments to track.
The wealthy with the capacity to set up such structures benefit from this. I would also suggest that people can probably use CFDs to evade insider trading. I don’t know however if these markets are monitored for insider trading, but I doubt it.

So why is the observed ‘voluntary tax compliance’ so high?
Well the problem here is what you call voluntary compliance. ‘Voluntary’ in this context means being obedient before you are caught. The implication is that people are still be coerced into submission.
The tax system in Australia is based on self-assessment and voluntary compliance by taxpayers. The probability of receiving an audit by the Tax Office is considerably low. The chance of being caught blatantly avoiding or evading tax is also unlikely, and if a taxpayer is caught, the culpability penalties are relatively minor. Yet the majority of taxpayers still comply with their obligations and pay their tax with good will (Braithwaite, 2003).

There is evidence that perceptions of unfair tax burdens or policies can affect taxpayers’ compliance decisions. According to Betty Jackson & Valerie Milliron, tax fairness has at least two dimensions (Jackson & Milliron, 1986) related to:

1. The benefits one receives for the tax dollars given.
2. The perceived equity of the taxpayer’s burden compared to other individuals. The taxpayers’ perceptions are framed by the equity of the tax system (see also Kinsey & Grasmick, 1993). If a taxpayer felt they were paying more than their fair share of tax compared to wealthy taxpayers (i.e. vertical inequality), they are more likely to see paying tax as a burden.

I would argue that there are additional reasons to be disgruntled by the tax system:

1. The lack of opportunity to seek redress, both in terms of policy and assessments
2. The lack of ethical framework for levying the tax
3. The lack of choice in participating in it, or chosing between systems that might exist in different states. You can’t so readily choose your country, but you can chose your state.

We can understand why tax evasion results in problems. Consider a study by Spicer and Becker (1980), which found that taxpayers increased their level of tax evasion when they considered themselves victims of vertical inequity, but decreased their tax evasion when they perceived themselves to be the beneficiaries of vertical inequity. The implication is three-fold:

1. That some people are not consistent in their decisions. This is understandable. Why should they act with principles when the government doesn’t.
2. The system supports the majority and punishes the minorities or marginal electorates served by political parties, e.g. farmers, pensioners, welfare recipients and business. These groups also benefit from considerable social sympathy because they are political organised.
3. The system is unfairly designed

Research into procedural justice shows that taxpayers are generally more compliant when they think the tax authorities have treated them fairly and respectfully (Wenzel, 2003). The implication is that there are levels of discontent with government. What these studies fail to raise is the taxpayer discontent with the way governments spend money. There are several grounds for this discontent:

1. The seemingly political (self serving) nature of the expenditures
2. The slow political process to take action
3. The low efficiency of the tax expenditures
4. The failure of government spending to achieve its stated goals
5. The extent of government spending which they don’t support
6. The extent to which government spending is marked by corruption
7. The extent to which government appears to be doing nothing to remedy these problems
8. The extent to which the government appears to be concealing or denying its lack of efficacy or incompetency in these matters

There is little empirical research available on the attitudes and beliefs of taxpayers actually known to be engaged in aggressive tax planning (Refer to Murphy, 2002a; 2002b; in press; Murphy & Byng, 2002a; 2002b; Hobson, 2002; Williams, 2004). Most studies only consider the attitudes and beliefs of taxpayers in the general population. Non-compliant taxpayer might be dismayed by this, believing that they are the victims of unfair policies that burden them at the expense of the majority. One cannot assume that their resentment is purely concerned with the distribution of the burden. Other issues are the unfairness of the system in terms of:

1. Administrative time & costs
2. The resources made available
3. The flexibility of the system to serve certain groups
4. Pursuing certain types of tax payers

Clearly the problem collecting data on tax evasion is the unwillingness of people to draw attention to themselves, because they fear the type of treatment afforded Rene Rivkin until he died under the stress of constant court battles with a tax office with unlimited resources. So pity the small taxpayer who has even less resources than Rene.

Most of the survey-based studies conducted have instead tried to measure taxpayers’ propensity to evade or avoid tax (Wallschutzky, 1984; Wearing & Headey, 1997). The problem with this approach is that people (including government) are blind to the ethical reasons for why taxpayers might legitimately avoid taxation. Well – that is no longer the case for the Australian Tax Office because I sent them a letter of complaint against their tax policies, asking to engage in a debate with their most capable officer. This lack of survey results serves the government because there is no ‘ethical’ case against it. The other side of this issue is the impact on the psyche of those hounded by the tax office. I know a great many Australians will regard these tax delinquents as ‘criminals’, but I would challenge anyone to offer evidence of that. To defend this position is not simply about citing a piece of legislation, it’s about establishing an ethical basis for levying taxation on people. I.e. Keep asking why until you run out of answers.
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Andrew Sheldon www.sheldonthinks.com

Why are tax penalties so harsh?

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The Australian government is able to borrow money for around 6% per annum, yet around the world government’s charge delinquent tax payers 24-30% per annum. The reason is of course to force taxpayers into compliance. This is pretty courageous policy when you consider that in many countries similar ‘loan shark’ payment regimes have been outlawed by government. I am thinking of Japan, but in other countries as well. Of course the paradox in the case of tax is that people did not ask or invite this, they just couldn’t pay their taxes. Sometimes for ethical reasons, but in other cases due to incapacity.
The reason why punishments are so harsh is because the government has picked up on research by Jensen (1969) highlighting a relationship between the inevitability of legal sanctions and crime rates, and reported evidence of a relationship between perceived risk of legal sanctions and self-reported delinquency in juveniles. These findings have since been interpreted as justification for the premise that ‘individuals will only comply with rules and regulations when confronted with harsh sanctions and penalties’.
Well government didn’t need research to know that. The whip, gun and incarceration have long been used as tools of coercion by all but the most despotic regimes in the world. But what the government needed was a credible sanction for its actions. Well such research gives them a sanction for unethical conduct.
One needs to recognise here that this is not fear of doing wrong, breaking the law. That is a different question, and one the government is not particularly interested in addressing. There is no ethical framework for tax. If they created one it would be subject to criticism, which they want to avoid. The way government works is to:
1. Avoid responsibility – see Aaron Russo’s movie ‘Fascism in America’
2. Avoid defining terms
3. Avoid the need for accountability
4. Avoid discussion
5. Deflect responsibility to the courts – in the case of the USA – discarding the US Constitution

Deterrence research conducted in the tax arena has continued to reveal conflicting results.
While this offers some support to the assertion that fear of detection is an effective deterrent to tax noncompliance (Witte & Woodbury, 1985; Slemrod, Blumenthal & Christian, 2001), it is not a deterrent without costs. The costs include suicide, anxiety and crime. It must be remembered that it might be illegal not to pay tax, but that is not the issue if the government cannot defend its policies. A great many tax laws are unfair, because they are arbitrary, and because the government is so despondent to taxpayers concerns, as they are relatively free of accountability.
There is no evidence to suggest that the severity of penalties or prosecution deters noncompliance in the long-term (Kinsey, 1988; Witte & Woodbury, 1985; Williams, 2001). An Australian study indicates that levels of tax non-compliance for the period 1985-1996 did not change as the severity of statutory fines increased. The same study also indicated that an increase in the number of gaoled tax offenders over this time had no impact (Devos, 2002). Prosecuting non-compliant taxpayers also has been demonstrated to have had limited impact on compliance (Williams, 2001).
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Andrew Sheldon www.sheldonthinks.com

Why Australians do not comply with their tax obligations

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Continuing on from our discussion based on my readings of “An examination of taxpayers’ attitudes towards the Australian tax system: Findings from a survey of tax scheme investors” (Nov 2004) by Kristina Murphy.
The tax office wants to apparently understand why taxpayers do not comply with their tax obligations. I can think of several reasons:
1. It is contrary to human nature – we have the faculty of rationality which means the capacity for choice. We take pride in exercising our choice, not in avoiding slavery (taxation). With arbitrary law, its no challenge to beat the law, and who would want to invest in such an unproductive activities. Perhaps those who really hate how the government spends the money.
2. It is not an efficient system – tax is inefficiently collected
3. It is poorly spent. Just look at the poor state of public utilities. This is because there is no accountability and poor service

Early research into tax compliance, evasion and avoidance was based upon a deterrence theory framework to explain their behaviour (refer to Jackson & Milliron, 1986; Roth, Scholz & Witte, 1989). Such theories portray people as ‘amoral profit-seekers whose actions motivated solely by rational analysis of the rewards and costs’ (Kagan & Scholz, 1984, p. 69; see also Kirchler & Maciejovsky, 2001). According to the deterrence view, people carefully assess opportunities and risks, and disobey the law when the anticipated fine and probability of being caught are small in relation to the profits to be made through non-compliance.
These assertions however assume that service to society is moral and pursuit of self-interest is necessarily at the expense of others. The capitalism concept of a small government based upon self-interest and user-pays public revenues is not ‘amoral’, its just a different ethical construct, but more importantly, it’s a logical one, and its consonant with human nature. The current system perverts taxpayers, undermining their motivation, values and thought process.
Research into tax evasion grew in the 1960s. Researchers reported an inverse correlation between the threat of legal punishment and crime (Gibbs, 1968; Jensen, 1969; Tittle, 1969). Yes, Hitler was able to embrace the same concept to its logical conclusion. One has to understand that we are not talking about ‘crime’ as defined by common (rational) law, but rather the arbitrary whim of government and the Australian Tax Office. We are talking about people who resent paying tax. I can cite a lot of reasons why the law is wrong because I have studied philosophy/ethics, but there are a lot of people who resent taxation, but they don’t have the intellectual skills to oppose it. There are still more who repress any resentment and just comply with it.
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Andrew Sheldon www.sheldonthinks.com

Tax Office research into non-compliance

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My GF knows I’ve been having trouble doing my tax. Being a slave to government just doesn’t come easy to me. My GF knows this, and sent this to me. It’s a study of taxpayer attitudes to paying tax. The difference between me and these people I guess is that they were screwed over by the Australian Tax Office (ATO) because their “aggressive tax planning” was deemed unhelpful to the ATO. Just as the ATO is able to make arbitrary rules to allow certain schemes, so it is able to make arbitrary rules to disallow them. This of courses all types of stress to those affected. But its all OK because the Australian government has a mandate on slavery.
If you would like to read “An examination of taxpayers’ attitudes towards the Australian tax system: Findings from a survey of tax scheme investors” (Nov 2004) by Kristina Murphy. This research was of course taxpayer funded, as is the institute, so don’t expect any objective insights. That is my role, as I pick this paper apart.

“The Centre for Tax System Integrity (CTSI) is a specialised research unit set up as a partnership between the Australian National University (ANU) and the Australian Taxation Office (ATO) to extend our understanding of how and why cooperation and contestation occur within the tax system”.

The paper investigates the increase in aggressive tax planning during the 1990s. The CTSI asserts that this aggressive financial planning “poses a serious threat to the integrity of Australia’s tax system”. This is of course a load of crap. The ATO has no integrity. It’s principles are entirely arbitrary just like the legislation created by our parliament. How can they speak of integrity when there is no moral framework for it. Thus there can be no framework for integrity – only the same obedience demanded by every fascist government. The Australian Tax Code sits juxtaposed against Common Law, which actually does have a basis in reason.
Incidentally the Internal Revenue Code in the USA is contrary to the US Constitution. I invite you to view Aaron Russo’s movie ‘Fascism in America’.
So what does the ATO do when people ‘aggressively’ seek to minimise their tax? They have a crackdown. There are no guns like with Hitler, but rest assured they are never too far away, and of course they would have them if you did.
In order to deal with the problem, the Australian the ATO’s crackdown on aggressive tax planning in 1990 when it issued amended assessments to 42,000 Australians who invested in mass marketed tax schemes. The majority of the scheme investors resisted the Tax Office’s attempts to recover scheme related tax debts. The reasons for the resistance were:
1. The ATO changed the rules, having been very slow to make any ruling on these schemes, and actually approved them. The other problem was the ATO’s administration of the schemes.
2. The poor manner in which the ATO dealt

According to survey data those who invested in tax schemes are more disillusioned with the tax system, are more hostile and resistant towards the ATO, and thus more likely to resent paying tax as a result.
The author says “In an ideal world, all taxpayers would voluntarily pay their taxes and comply with all of their tax obligations willingly”. This is a sweeping statement that needs consideration. If you accept this statement then we would be living in a socialist state. The reason why people don’t like being forced is clear enough. It disempowers, it demotivates, it alienates people. I would argue that the notion that a single government agency can fairly collect and that another agency government can ‘ideally’ distribute money is much greater fiction. I would also argue that capitalism has done a far, far better job at ‘voluntarily’ redistributing wealth, and that is within the confusion of a ‘mixed economy’. There is no reason to think that a capitalist economy based on freedom to negotiate and ‘user pays’ principles could not work, afterall people have a choice. Capitalism constrained by a mixed economy tends to manage 3% gains in productivity a year, whereas the taxing state charges more for less, without even reducing the tax burden.
So what is aggressive tax schemes? It is "non-compliant or fraudulent activity that could be most appropriately described as tax evasion (for example, creating false expenses or shifting money offshore). There is also a third type of strategy used by some taxpayers that falls somewhere between these two extremes". These are the tax avoidance strategies that the Tax Office commonly refers to as aggressive tax planning strategies.
This all begs the question of why is it wrong to avoid paying something you don’t support? Why is slavery an appropriate? People might say that you are paying for services rendered. But in fact most people never asked for those services. In fact they serve politicians to preserve a pretence that they are needed as ‘middlemen’. Why would one want to comply with a dictator if one could avoid it? The only reason is fear, which is why I never get any response to my blogs. People are scared? Yes, this is a fear-based system like Nazism.
The reason for the crackdown is that during the 1990s “an estimated $4 billion in tax revenue was lost as a result of 42, 000 Australians claiming deductions for their mass marketed tax schemes”. Well it has to be recognised that these schemes emerged because:
1. Many Australians don’t like to pay tax, or excessive amounts of tax
2. The ATO survives on the basis of arbitrary law. The problem with arbitrary law is that its easy to find an arbitrary basis for ‘loopholes’.
3. The taxpayer appreciates that the parliamentary or democratic process gives them no basis to impact tax laws. There is no court you can go to overturn unethical laws. There is an ombudsman, but he can only advise the tax office or government, and he is a paid appointment by the government, so don’t expect any favourable consideration there.

The other problem of course is that Australians have no sense of justice. Occasionally they go overseas to fight for democracy, but its really some nebulas ideal to them that they never really had to define. This was always ‘The Lucky Country’. Well I can tell you, from my experience it feels much better:
1. Not having to pay so much tax (and that it be based on a ‘user pays’ formula)
2. Not having to observe the insanity of how the government spends it
3. Not having to jump over the ATO’s arbitrary rules or hurdles like a lap dog
4. Not having to observe that the government is using your proceeds to help people who are more fortunate than you (e.g. Corporations) and less entitled.

‘Scheme related tax deductions were found to increase from $54 million in 1994 to over $1 billion in 1998’. Let’s remember that it was the ATO’s arbitrary rules that opened up those ‘windows’ and subsequently closed them down. You might ask why the ATO actually allows deductions at all. They are a nightmare for individuals and small businesses to administer, as is the necessity to set up a separate tax entity – a corporation, thus requiring a person to prepare two tax returns and employ an accountant.
The implication is that the government wants you out there working hard, but not for your own sake, but theirs. People, that is fascism. You empower them by being scared of them.
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Andrew Sheldon www.sheldonthinks.com