Question:
Case study on Australia Tax Law.
It is noteworthy to denote that there are several reasons for studying taxation. Perhaps, taxing a citizen is an important aspect and vital procedure for financing most of the necessary public sector expenses as tax revenues generated is important for the government to manage the operation of a country as well as the execution of the activities of administration. Nevertheless, it acts as source for producing several social programmes, such as the activities involving the health service for public along with education and cultural welfare programmes. Thus, the process of taxation is considered as one of the most significant ways in which societies distributional goals can be achieved.
The study forms an necessary part for any complete examination of taxations. The actions of the communities segregate from nature by executing the activities from public sector. Study of taxations forms an essential part in democratic countries for administration expenses and correlates with the ways of generating revenues as determined by the constitutional provisions. In addition to this, the study of taxation represents an indispensable instrument for decision makers who want to direct scare resources for general use in the community, which forms a part of the autonomous progression.
There are two basic approaches to study tax, which are as follows;
In demonstrating the two approaches, an emphasis has been paid which can be defined as normative questions. It is observed that tax study has an additional dimensions even though it is matter of interest to ask regarding the efficient definition of tax and how it can be deliberate whereas it is equally important to understand the nature of present financial monetary structure.
Under this approach the systems of taxations defines an effective characteristics which illustrates the variations of revenue systems amid different jurisdictions. Perhaps the study of the present income systems highlights that there is a structure which is parallel in spite of the fact that there are many variations in personal income, profits derived by the corporate firms, properties etc. the study reveals that each tax systems has effective tax structure having distinct rates for a specific components of tax. Hence, a complete and effective approach to taxation systems consists of both positive as well as normative analysis.
The complete approach to the political financial system of taxation commences with the constructive presumption. The approach emphasis on collective process of decision making in relation to the fiscal structures which is designed to produce a nearer link amid taxation and expenses on institutional and financial limitations which might have effect limited compulsion. The theory suggested some ways of reducing the coercion and segregations by proposing the unanimity or competent budgetary measures adopted for decision making.
Hence, it is to be noted that approach for decision-making is rather perspective approach and general and partial equilibrium of decision-making procedure is considered as exogenous. Such study is demonstrated by the supposition of communal planner who makes such decision on behalf of the collectively under the exogenously given welfare functions. Hence, the study has emphasised towards shifting and identification of dimension of political wellbeing losses in order to determine the tax systems to maximise the social welfare by assuming the given analytical framework.
It is understood that the tax structure of an economy is solely dependent on the basis of tax rate, its base of tax and variation in rate of tax. Tax base can be referred as the base on which the amount of tax is applicable. The rate of tax signifies the percentage of tax, which is to be paid in taxes. In order to determine the tax rate it is vital to know the rate of tax, which equals the base. There are several basis of tax rate for calculating any income level and it is applicable to any level of income. The tax structure consists of the following;
Regressive tax rate: A regressive tax rate can be defined as the one, which is in reverse proportional to profits. The lower is the return, higher is the tax rate in relation with proceeds. It is understood that most of the regressive taxes are measured on the products and services under which the actual rate of tax is in accordance with the percentage of cost of the product and services. Hence, it is to be understood that during the process of paying tax a person who is poor is believed to have paid more than the amount of a wealthy man. The most usual type of regressive tax is the sales tax and the value added tax which is commonly known as (VAT).
The indispensible effect of regressive form of tax is that it is usually alleviate by paying to the underprivileged and by exempting the essentials commodities and services, such as foodstuff, from regressive tax.
Progressive tax: The term progressive tax rate refers to the higher income of tax. It is believed that almost all the progressive taxes are prearranged in such a way, which is in proportional to marginal tax rate, and hence, the system of progressive effect of tax base is applicable to that part of tax which represents higher income and superior than the assured amount. The segment of the duty base is subjected to particular levy rate, which is known as toll bracket which constantly has the lower and upper limit in exception to the lower limit which does not has any upper limit.
Proportional tax: Proportional tax rate is known as the flat rate of tax, which is applied on the same rate of tax forming a part of any level of income having any dimension of duty base. For example if Steve earns $60,000, Mary earns $120,000, and the proportional levy rate is 10% then Steve is liable to pay $6000 while on the other hand Mary is liable to pay $12.000. hence it is to be believed that numerous states follows income tax systems and sales tax systems which is in relation to proportional tax systems.
The aims of the tax law improvement project states a clear goals that is to redraft the income tax law in order to make it more simpler and to lower the cost of compliance. Such costs are incurred by the who pays tax through acquisition of in-house and external administrative and legal infrastructure in order to meet the obligations of external administrative and legal infrastructure requirement of taxation obligations of tax. Under the tax liability improvement project the cost of compliance is segregated into those cost which is necessary to meet requirements of effective communications related to law. The success of tax law improvement project is aimed towards lowering the cost of compliance and administrative costs which could be difficult to quantify and measure. The aims and goals for tax law improvement projects are given below;
The procedure involved in consultation: The guideline prescribed by the RIS reflects the significance of considering the prevailing government policy along with the legislative considerations and consultations. The major objective of tax law improvement project is to comply in wider sense with these objectives. For example, the procedure for review includes the release of two vital information’s in relation to the papers and creation of consultation mechanism related to the interest groups and agencies. In addition to these the consultation could be enhanced by the tax law improvement projects by offering more information through the use of papers regarding the characteristics and the extent of compliance costs. Hence, such cost involves the considerations of the impacts on comprehensive compliance cost for each of the concerned stage of tax law improvement projects.
It is to be noted that there are three different types of approaches for improvement in taxation law, which has been considered by the tax law improvement project. According to the tax law improvement project the preferred approach which has become more specific as it works down after starting with the core provisions, there after the general provisions and finally the specialist groupings. Nevertheless the provision which has been framed is for improved numbering, which is considered as the toolbox for key terms and other noteworthy improvements.
Hence the preferred approach of the tax law improvement project is developed after taking into the account several other elements such as providing increased benefit to the users along with administrative ease and efficiency. The impact created by those laws, which have an effect on parliament and community. It also determines that weather the process has been completed in a certain prescribed stage or in a progressive manner. However, it is also denoted that it is difficult to consider the tax law improvement project regarding the achievement of goals until improved information is available.
The income tax assessment act is one the solitary statute under which an income tax generated is assessed. The act is gradually being re-written into the income tax assessment act 1997 and hence new matters are added into the act. The two most income important income tax assessment act are;
It is to be noted that both the tax is amended over the years and it is believed to have been made it to a long act consisting of thousands pages. The act interacts in following ways:
A number of the most imperative features or characteristics of good tax systems are as follows:
Productivity and monetary adequacy: This is an significant standard, which governs a good tax systems in a nations which yields adequate amount of resources for the government so that it able to execute its wellbeing and developmental activities. If the tax systems fail to generate sufficient resources, the government will resort to deficit financing. Thus, it is evident that deficit-financing process is bound to raise the prices of the commodities, which is damaging for the public. In order to make the tax systems more creative it ought to be so designed that it is broad base and contains the element of direct and indirect tax.
Elasticity of taxation: The principle of taxation is such that it affects the developed countries and should be designed that it is in accordance with the principle of elasticity. As per the concept of principle of elasticity of taxation systems, the national incomes increase due to the growth of economic and the revenue for the government increases when the tax system is elastic.
Diversity: It is evident that good tax systems should comply with the principle of diversity. This defines that there should not be a single or few modes of tax collections systems from which the government seeks to raise a large number of revenues. Having few tax systems will compel the government to raise the existing rate of tax which will lead to adverse effect and it will affect the saving capacity of the people. Therefore, the tax systems should be such that it has a multi-point source of generating revenues for the government. Such systems call for mix in the variations of direct and indirect tax.
Instrument for growth of economy: In a developing nation the instrument of tax serves an instrument for economic growth. Thus, economic growth can be defined as primarily the rate of capital formation. In a developing country, an emphasis has been paid in the capital formation for the common public at a relative high rate. It is also known as the process of mobilisation of resources in order to finance the capital formation in public sector.
Taxation for ensuring the economic stability: A tax systems should be such that it ensures economic stability. Several study reveals that economic systems is affected when tax systems tends to vary. Hence a characteristics of good tax systems involves that the systems of tax should be built in such way that it represents progressive in relation to the changes in national income. Perhaps, this ensures that when the national income increases an increasing part must come automatically to the government.
References
Kenny, P. (2012). Australian tax 2012. Chatswood, N.S.W.: LexisNexis Butterworths.
Krever, R. (2012). Australian taxation law cases 2012. Pyrmont, N.S.W.: Thomson Reuters.
Management of the Australian Taxation Office’s property portfolio. (2013). Barton, ACT: Australian National Audit Office.
Nethercott, L., Richardson, G. and Devos, K. (2012). Australian taxation study manual. North Ryde, N.S.W.: CCH Australia.
Woellner, R. (2013). Australian taxation law 2012. North Ryde [N.S.W.]: CCH Australia.
Slemrod, J., & Gillitzer, C. (2013). Tax systems. MIT Press.
Mascagni, G., Moore, M., & McCluskey, R. (2014). Tax Revenue Mobilistation In Developing Countries: Issues and Challenges.
Oats, L. M., & Morris, G. M. (2015). Tax Complexity and Symbolic Power.
Kenny, L. W., & Winer, S. L. (2016). Tax systems in the world: An empirical investigation into the importance of tax bases, administration costs, scale and political regime. International Tax and Public Finance, 13(2-3), 181-215.
Hettich, W., & Winer, S. L. (2005). Democratic choice and taxation: A theoretical and empirical analysis. Cambridge University Press.
Tahk, S. C. (2013). Everything Is Tax: Evaluating the Structural Transformation of Policymaking. Harv. J. on Legis., 50, 67.
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