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Markets in Vice
Markets in Virtue
Federation Press, Oxford University Press
John Braithwaite
RegNet, Australian National University
Low risk companies dropped from Program
56 companies of modest risk— letter before next return
34 medium risk companies— written explanation to be
sent to designated ATO officer
32 medium-high risk companies —
TPRR on next return
46 high risk
companies — audit
Enforcement Pyramid: Transfer Pricing Record Review Project
META REGULATION
regulated self-regulation
Triple Loop Learning
From Christine Parker 2002. The Open Corporation. Cambridge University Press.
Deloitte and Touche letter to US corporations:
“Dear _____As we discussed, set forth below are the details of our proposal to recommend and implement our tax strategy to eliminate the Federal and state Income taxes associated with [the company's] income for up to five (5) years (“the Strategy”)
Aggressive Tax Planning is a “natural outgrowth of an improvement in the efficiency of corporate management, as a result of which corporate income tax liabilities are treated, along with other business liabilities, as costs that respond to modern management techniques. Corporate tax shelters, I believe, are a demand-driven phenomenon, not a supply-side problem. Moreover, the trend is irreversible and will only intensify as corporate managerial arts become more sophisticated.”
New York tax lawyer
“In Arcadia, tax lawyers would discuss with each other what was a fair interpretation confident that the IRS would be looking for that fair interpretation and that the courts would be looking for it as well. The worm in the apple was progressively more ruthless competition for tax business that was not under the control of any single set of professional norms, certainly not those of tax lawyers alone. Accountingfirms, investment banks, financial advisers, all within-house lawyers compete with law firms for advice.”
Another New York tax lawyer
deregulation of professions and finance sector
newfinancial
engineering
globalization –international arbitrage
gaming of lawaggressive competition
In tax advice market
more aggressive supply of tax shelters
enforcement swamping –detection/enforcement failure
moral termites- ‘everyone cheats’
- ‘total wipe-out’ of tax is OK
shelters may become too embedded
to fail
lull before next cycle of
gaming the law
reverse contagion out of shelters
renewed moral rectitude against ‘tax cheats’
more aggressive demand for tax shelters
sheltercontagion
responsivelaw reform
renewed intelligence/enforcement
uncheckedcontagion
Sukurai & V. Braithwaite (2003)
Factor analysis of preferred type of tax adviser:
1. Creative accounting, aggressive tax planning
2. Cautious minimising with conflict avoidance
3. Honest and low fuss
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