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