Category: Volume 17 Issue 2

Volume 17, Issue 2 – Wu, Brown & Brown

EVASION OF INTEREST WITHHOLDING TAX: EVIDENCE FROM TRADING VOLUMES IN AUSTRALIAN GOVERNMENT BONDS

By Yanghui (Maggie) Wu, Philip G Brown and Rob Brown

There is very little evidence on the evasion of interest withholding tax. We find such evidence by focussing on the 5 December 2009 abolition of interest withholding tax on foreign investors in Australian government bonds. Prior to this date, foreign investors had an incentive to evade the tax by selling bonds ‘just prior to’ ex-interest days and (possibly) reinvesting on or after the ex-interest day. This practice is referred to as ‘coupon washing’. To detect the presence of coupon washing, we analyse daily trading volumes in Australian government bonds between 1998 and 2013. We find clear evidence of coupon washing in the period before the abolition of the tax. Evidence of coupon washing is much weaker after the abolition. We also find that abnormally high volumes are concentrated in high-coupon bonds, which further supports our findings, because high coupons provide a greater incentive for coupon washing than low coupons.

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Volume 17, Issue 2 – Sourdin

DEALING WITH DISPUTES ABOUT TAXATION IN A ‘FAIR’ WAY

By Tania Sourdin

Alternative Dispute Resolution (ADR) processes are increasingly being used to deal with a wide range of disputes that can include regulatory disputes involving government. This article explores the use of ADR in disputes relating to taxation and involves a consideration of effectiveness, procedural justice indicators and potential issues with the use of ADR in these disputes. In particular, perceptions of fairness and outcome are contrasted as well as indicia relating to participatory features. The article is based on a study that involved a selected sample of 118 Australian tax disputes that progressed to conciliation, mediation and evaluation over a 12 month period in 2013 and 2014. The study examined the results of 340 surveys of those involved in the sample disputes. It is suggested that procedural justice factors can impact on effectiveness of an ADR process and whether a dispute will be ‘finalised’, however, other factors that are related to the time taken and costs expended can also be relevant in shaping perceptions with different participant groups and may impact on the outcome reached.

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