Markets in Vice, Markets in VirtueWhat have the market forces of supply and demand to do with making the tax system more equitable? John Braithwaite argues that the competition policies that attack monopolies to ensure vigorous price competition and more efficient production of goods also drive more efficient production of "bads". Tax avoidance, like any good or service, follows market logic: as the supply increases, so does the demand.Braithwaite makes this argument and explores its implications through a detailed comparative case study of taxation in the United States and Australia. He shows that it is possible to "flip" markets in the vice of tax avoidance to markets in the virtue of tax system integrity.Braithwaite sets out specific regulatory strategies and gives examples of how these might be applied. The result is a blueprint for restoring the equity of Western tax systems and a breakthrough theory of how regulators can support markets in virtue and curtail markets in vice. Markets in Vice, Markets in Virtue is essential reading for anyone involved in policy, governance and regulation. It has profound implications for business, and is of special interest to those working in taxation. |
Contents
| 3 | |
| 4 | |
| 5 | |
| 6 | |
Regulating one mans vice another womans virtue | 8 |
The limits of competition policy in respect of vice | 11 |
Developing a regulatory theory for flipping markets from vice to virtue | 12 |
Tax systems in crisis | 16 |
The impact of the 1986 reforms | 105 |
The advice market | 106 |
Investment banks | 107 |
Appetite for risk and the advice market | 109 |
Firms in the advice market | 110 |
Aggression pays for the major accounting firms | 112 |
Enter insurers to the advice market | 113 |
Combatting worryfree aggressive tax planning | 115 |
The cyclical nature of aggressive tax planning | 17 |
The larger crisis | 18 |
From progressive to regressive taxation | 19 |
Lower corporate tax | 20 |
Tax breaks and loophole madness | 21 |
Mobile wealth | 22 |
Fiscal termites | 23 |
Moral termites | 24 |
Not so simple choices | 25 |
Policy options | 26 |
A widening US corporate tax gap in the past decade a narrowing Australian gap | 27 |
What kind of future? | 31 |
The political prognosis | 32 |
Formulating a transformative vision | 33 |
The Australian advice market | 37 |
The 1980s | 38 |
From 2000 | 40 |
The interviews | 42 |
Client mix | 43 |
Advice mentalities | 44 |
Product development | 46 |
Reputational competition | 47 |
The ideas people | 48 |
The investors | 49 |
Supply or demand driven? | 51 |
The impact of rulings on supply and demand | 52 |
From supply to demanddriven schemes | 53 |
International supply of tax planning opportunities | 54 |
Tax havens and concealed transactions | 55 |
Is international tax planning supply or demand driven? | 57 |
Enforcement challenges | 60 |
Strategic cases and enforcement strategy | 62 |
ATO competence in compliance management | 64 |
How investors perceive enforcement risks | 65 |
Australian innovation in regulating aggressive tax planning | 68 |
The ATO Compliance Model | 71 |
b Building community partnerships | 73 |
c Increased flexibility in ATO operations to encourage and support compliance | 74 |
Encouraging leadership at all levels | 75 |
d More and escalating regulatory options to enforce compliance | 76 |
The Promoters Taskforce | 78 |
Crafting specific enforcement pyramids for specific schemes | 81 |
Settlements | 83 |
The High Wealth Individuals Taskforce | 84 |
Meta risk management | 85 |
The Registered Software Project | 87 |
Transfer Pricing Record Review and Improvement Project | 89 |
Meta risk management and meta meta risk management | 90 |
The project | 91 |
The Advance Pricing Agreement option | 92 |
The results | 93 |
Project objectives | 95 |
The Project measured against the ATO Compliance Model | 96 |
An expanded riskleveraging toolbox | 97 |
The New York advice market | 103 |
A brief history of aggressive tax planning in America | 104 |
International arbitrage | 120 |
Arbitrage in selfexecuting and non selfexecuting tax systems | 123 |
Is it possible to have the best of both worlds? | 124 |
Globalisation of tax policy? | 126 |
IRS enforcement initiatives | 128 |
IRS announcements | 131 |
Relationships with the IRS | 132 |
Penalties | 134 |
Comparing the drivers of and responses to aggressive tax planning in Australia and the US | 137 |
The deeper causes of the US boom of the late 1990s | 138 |
The possibilities for reverse contagion | 141 |
Conclusion | 142 |
Reforming the law | 144 |
Uncertainties with rules | 145 |
Rules possess a penumbra of uncertainty | 146 |
Discretion to pick and choose from a thicket of rules | 147 |
a principled integrity of rules | 149 |
Civil liberty safeguards | 151 |
The general antiavoidance principle | 152 |
Radically restructuring the substance as well as the form of tax law | 154 |
Meta risk management using natural systems | 156 |
The Consolidation Project | 158 |
Monitoring natural systems and raising the bar on tax obligations | 159 |
Transparency and outsidein design | 160 |
Defiance gaming and natural systems | 161 |
Limits of the natural systems approach | 163 |
Finding pathways through a morass of complexity and uncertainty | 166 |
Intelligent tax office culture | 167 |
Expanded returns for scheme participants | 168 |
Transforming tax office culture | 170 |
Asymmetry of punishment over reward | 172 |
Pay asymmetry and culture | 174 |
From procedures manual to storybook from a process improvement to a problem solving culture | 175 |
Conclusion | 176 |
Reforming enforcement strategy | 177 |
Responsive regulation in action | 178 |
Adequate and escalating penalties | 181 |
Interagency target swapping | 182 |
Intelligence sharing for broader community interest | 183 |
When other regulators can help the tax authority | 184 |
Tackling enforcement swamping | 185 |
Tackling the culture of compliance of the Big Four accounting firms and the Big Few investment banks | 188 |
International collaboration towards enforcement | 191 |
A more credible peak to the enforcement pyramid | 193 |
Flipping markets in vice to markets in virtue | 197 |
Rational virtue | 198 |
1 Heavy promoter penalties | 199 |
3 Targeting the clients of A list promoters | 200 |
5 Strict liability | 201 |
6 Shelter disclosure and booktax disclosure for corporations | 202 |
9 Corporate certification of continuous improvement in tax integrity | 203 |
Webs of influence | 205 |
Wider lessons | 208 |
References | 212 |
| 225 | |
Other editions - View all
Common terms and phrases
accounting firms Advance Pricing Agreement advice market advisers aggressive tax planning anti-avoidance arbitrage Arthur Andersen assessment audit Australian Australian Taxation Office barristers Big Five boom boutique Braithwaite cent Centre for Tax Chapter clients Commissioner competition policy complex Compliance Model contagion corporate tax courts culture demand disclosure economic effective enforcement pyramid example Figure flip markets GAAR global high-wealth individuals ideas income tax intelligence international arbitrage interviews investment banks investors Kalgoorlie law firms less markets in vice markets in virtue mass marketed schemes meta risk management million natural systems organisation political Pricing Record Review principles problem professional profits regulatory restorative justice revenue Review and Improvement shift strategy Sydney target tax advice tax authority tax avoidance tax collections tax havens tax law tax lawyers tax liability tax office tax return tax shelter Tax System Integrity taxation taxpayers termites transactions Transfer Pricing Record vice to markets York