Despite the swift (and often significant) legislative responses that have been provided so far, there seems to be little sign of concern among policymakers about the increasing complexity and uncertainty associated with the introduction of such measures. While in the past legislators often attempted to improve the design and management of their primary tax rules to achieve a set policy objective, countries are now increasingly trying to introduce GAAR and GAAR-like measures as a “last resort” to curb tax evasion. It appears that Article 165-5(1)(aa) is intended to play a similar role to Article 177C(2) of Pt IVA. [67] Similar to subsection 177C(2), paragraph 165-5(1)(aa) applies only to electives, etc., that are “expressly provided” in certain statutes. It is apparent from the explanatory memorandum to the draft law introducing the GSTA that Article 165(1)(aa) was incorporated into the legislation in order to ensure that the exercise of an explicit choice, etc., under the relevant laws would not trigger the application of the anti-avoidance provisions. As of tonight, the general anti-tax evasion provisions of Part IVA of the Income Tax Act will be expanded so that they can be applied to Australia`s withholding tax system. It appears that a common feature of modern Australian tax law is that it inevitably includes some form of general anti-tax avoidance provisions. This often happens despite the fact that legislation may nevertheless be peppered with specific anti-tax evasion provisions to combat certain types of schemes. While Division 165 is clearly modeled on Pt IVA, it is not simply a copy of the income tax regulations with a “GST touch”. The department has been designed with great foresight and must be interpreted in its particular context. In particular, although this article was not explicitly mentioned in the explanatory memorandum, he pointed out that the legislature, in its drafting of Division 165, sought to subtly address a number of “restrictions” faced by Pt IVA. In addition to the general anti-tax avoidance regime, Australia has proactively adopted specific rules in recent years to address growing concerns about the tax practices of multinational corporations. These rules are in line with OECD measures to combat base erosion and profit shifting in many OECD countries.

These include MAAL and tax on diverted profits. The best-known general provisions for combating tax evasion in modern times are certainly those contained in Pt IVA (sections 177A to 177H) of the Income Tax Assessment Act 1936 (Cth) (“ITAA36”). The anti-tax avoidance provisions contained in subsection 8 of the Sales Tax Assessment Act 1992 (Cth) have been modelled on these provisions, as have the anti-tax avoidance provisions of section 67 of the Benefits Tax Assessment Act 1986 (Cth). In order to continue this trend, the legislator considered it appropriate to include in section 165 of the New Tax System (Goods and Services Tax) Act 1999 (GSTA) (“GSTA”) anti-avoidance provisions along the lines of the IVA Tax Act. This approach follows the general trend of many other jurisdictions that have also included general anti-tax avoidance provisions in their respective GST legislation. [1] While anti-tax avoidance provisions are worded differently in different jurisdictions, they are generally all intended to combat similar practices, namely agreements to reduce the GST, increase input credits, or change the date on which GST is payable or refunds are due. [11] This may be part of the reason why British Parliament was so reluctant to include general anti-tax avoidance provisions in its tax legislation and instead relied on common law solutions such as “tax nullity” to combat tax avoidance. See below for discussion of GST tax nullity. It is difficult to formulate anti-tax avoidance provisions that are broad enough to be effective, but not broad enough to apply to all transactions. While the broad discretion in Part IVA may give rise to uncertainty, this discretion may be necessary for Part IVA to be in this direction for the provisions to be effective. For example, it may be difficult to include in Part IVA a provision that Part IVA does not apply generally in cases where the law has made a specific concession, as this could allow courts to interpret Part IV in such a way that the “principle of choice” (see below) can be applied.

This effectively neutralizes the application of Article 260. the predecessor of Part IVA. The paper begins with an overview of the operation of the general anti-avoidance provisions of Part IVA of the Income Tax Assessment Act 1936 (`the Act`) and a review of the relevant legal provisions. The analysis in Part 5 above shows that paragraph 165-1 lists four situations that are considered to fall outside the scope of the anti-avoidance provisions. Although situations are cited as examples of agreements that are not artificial or invented, the first three examples certainly illustrate situations falling under article 165 (5) (1) (aa). It is interesting to examine how the rules of negation and compensation might work in practice. Justice Hill illustrates the dilemma they may face when making an application. [104] The figure refers to an arrangement where GST is paid less than what would otherwise be payable: the rules apply to payments between related parties, members of a controlled group or parties under a structured arrangement. We have developed guidelines to help all taxpayers who want to eliminate hybrid outcomes and avoid applying the new rules.

It is generally accepted that the absence of general anti-avoidance provisions in the relevant UK legislation has led to the further development of the tax nullity doctrine. In other words, the doctrine evolved in response to the fact that there were no general legal measures to combat tax evasion in UK legislation. Because ITAA36 contained such provisions (originally in former section 260 and now in Pt IVA), Australian courts have not applied the doctrine in the income tax context. The reason for the rejection of the doctrine can best be summed up in the following passage from John v FC of T,[26] where the High Court stated: But I maintain that taxpayers who simply use the concessions for the purposes for which they were included in the Act cannot and will not be affected by the new provisions. In particular, Part IVA, for example, will not deprive people who simply respond to our concessions to invest in Australian films from benefiting from the tax benefits that are part of it. But I think it is indisputable that a blatant abuse of these and other “incentive” concessions should fall within the scope of Part IVA. A general anti-avoidance provision would be of little use if it could not be used to prevent the unintentional exploitation of such concessions in the law or could serve as a complement to a specific anti-avoidance provision where a taxpayer has entered into tailor-made agreements so that the provision is circumvented formally but not substantially. The rules are also intended to encourage large global bodies to provide the Commissioner with sufficient information to enable the early resolution of disputes. However, there is no express provision in Part IVA that exempts from reductions only for the purposes for which they were included in the Act are excluded from the Part. In areas where the law provides for specific political concessions (e.g. It may be appropriate for the Commissioner to make a decision that is not intended to apply Part IVa to areas where a specific concession has been granted for political reasons. (28) It is also possible for a taxpayer to apply to the Commissioner for a private decision on proposed schemes.

The Commissioner will examine the matter as if the facts reported by the taxpayer had actually occurred. A private decision is specific to the taxpayer concerned and the respective transaction, act or event.