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Tax Evasion Sample Essay & Outline

Outline

I.Introduction

(a) Tax evasion is an illegal evasion of taxes and is growing all over the world. There is a need to correct this and it can be done effectively by the use of accounting information systems.

1. The accounting information systems help in making tax evasion a near impossibility. This is because all the taxpayers are computerized and all their earnings reflect on a digital accounting information system collected from the field. -
2. Accountants need to get information regarding the use of accounting information systems. This will equip with a vital tool to deal with tax evasion, collection and audit.
3. There is a need for accountants to have a keen look into suspected fraudulent companies in order to see whether they are deliberately misrepresenting the true state of their revenue. The use of an accounting information system is imperative in this situation.

(b) Definition of tax evasion and its impact on the economy

1. Tax evasion impact on the economy
2. Tax evasion impact on other individuals and corporate with tax evasion intentions.
3. The effect of tax evasion on the integrity of top management of companies as well as individuals.

(c) Tax work is extremely important as it plays a basic role in guiding national economies as well as improving developmental activities.

II. Problem Statement

(a) Taxation performance the audit and collection are important in helping countries achieving financial, economic, political and social objectives. There is therefore, a need for accounting agencies and departments to apply effective accounting systems which will consequently represent a significant turning point in improving efficiency tax collection as well as audit. This will be an important system when it comes to the reduction of tax evasion.

III.The relationship between accounting information systems and tax evasion.

(a) The accounting information systems are imperative in that they are effective enough to influence tax acceptance, collection as well as audit. This makes sure that every person pays tax and those that evade can be easily identified.
(b) The efficiency of the accounting information systems can be measured by the renewal of annual financial reports which are issued by the income Tax department.

IV. How the Accounting Information systems help in solving the problem of tax evasion

(a) Accounting information systems as a prevention tool
(b) Accounting information systems as a screening tool
(c) Accounting information systems as an audit tool.

V. Conclusion

Taxation represents one of the complex problems faced by countries and companies in the 21st century. Tax evasion has become to frequent and obvious to ignore, as a result, there is a need to find a lasting solution to this problem. The use of accounting information systems can be described as a way to go as it allows tax evasion to be prevented, screened and audited.

References

Mo, P. L. L. (2003). Tax avoidance and anti-avoidance measures in major developing economies. Westport, Conn: Praeger.
Hopper, T. (2012). Handbook of accounting and development. Cheltenham: Edward Elgar.
Turner, L., & Weickgenannt, A. (2008). Accounting information systems: Controls and the processes. Hoboken, N.J: Wiley.
Considine, B., Parkes, A., Olesen, K., Blount, . Y., & Speer, D. (2012). Accounting information systems: Understanding business processes. Milton, Qld: John Wiley & Sons Australia, Ltd.
Gelinas, U. J., Dull, R. B., & Wheeler, P. R. (2012). Accounting information systems. Mason, OH: South-Western/Cengage Learning.
Romney, M. B., & Steinbart, P. J. (2015). Accounting information systems.
McGee, R. W., & Preobragenskaya, G. G. (2006). Accounting and financial system reform in Eastern Europe and Asia. New York, NY: Springer.

Essay on Australia Tax Laws

Australia follows a blank approach at the level of both the capital borrowers and the money lender for income tax purposes. All interest-generating debt or all dividend-generating equity with the respective tax consequences, irrespective of the actual foreign tax classification and treatment. In the case of Australia as the source country, the tax classification of hybrid financial instruments is dividend-generation equity for income tax purposes.

Entering into the Agency contract

The agent retains the right to communicate and to indemnity for liabilities incurred as a result of improper termination by the foreign principal. However, there is no precedent for required compensation payments in Australian law (AUSTRALIAN INSTITUTE OF BANKERS, & AUSTRALIAN INSTITUTE OF BANKING AND FINANCE, 1984). Both the agent and foreign principal may stipulate specific causes for termination of the agreement. Although no particular period exists that defines a reasonable notice period, courts will take into consideration the nature and proposed and actual duration of the contract when determining in case reasonable notice was given. A licencing agreements usually exist and has to be considered in the entry requirements (Robert, 1880).

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Many Australian companies have developed a wide range of innovative technology and processes with potential for broader applications; others require access to outside technology. A licencing agreement involving an Australian licensee should cover the following basic terms: type of license being granted, the territory being given, license fee or royalty and basis of calculating payments (LAWYERS CO-OPERATIVE PUBLISHING COMPANY, 1919). One of the main advantages of the licencing is that it enables the foreign company to minimize its need to invest capital while allowing it to exploit the local knowledge and existing after-sales service network of the licensee. The disadvantage only emerges when there is a need to share some shares in return (WEI, 2000).

Benefits paid by Alesse to Mrs Gilling for travel to negotiate

When movements are involved in the line of transacting businesses, the primary focus occurs in the range of the economies of scale. The economies of scale and the scope characteristics will be adequately catered for the entire process in an attempt to try and harmonize the process of operation. The principal economies are gained in the provision of central, mainly back-office, services such as accounting and computing. The chain of distribution needs to be shorter so as to realize many benefits and to ensure that the management could gain much access to their financial conditions. The consideration is on the economic environment in which the party will conduct the business. It will put a focus on the assessment of the competition in the immediate locality of the business.

The gain is normally a value judgement based upon knowledge gained by the prospective purchaser at the point of sale. The benefits to be realized majorly focus on better terms of negotiation that result in good pricing that also improves the quality and the delivery response. The benefits that were paid include some constraints. Alesse paid for a number of formal dinners and local sightseeing trips that was valued at A$850 and a leather travel set valued at A$2,500. The final contract negotiation resulted in a number of issues.

Bronx being regarded as the sole supplier of Alesse lighting systems in Australia for five years from 1 March 2015 and Bronx will pay $85,000 for the sole agency rights of sale and distribution. The Facts Mrs Gilling owns 100% of the shares in Bronx Lighting Pty Ltd ‘Bronx’ as at 1 July 2014. Bronx supplies and installs are lighting for large commercial projects and has undergone substantial growth in the last two years. The business employs 45 staff including Mrs Gilling’s son and daughter (responsible respectively for the marketing and finance aspects of the business).

Bronx has negotiated a sole agency agreement with a high profile lighting system manufacturer located in Italy (‘Alesse’). This single company will add substantially to the turnover of Bronx. Under the exclusive agency agreement, Bronx will promote and sell the Alesse lighting systems in Australia. Mrs Gilling travelled to Italy in November 2014 to negotiate the terms of the exclusive agency agreement, spending $7,500 on travel costs as well as $10,500 in legal fees. The agreement was signed on 1 March 2015.

Alesse paid for a number of formal dinners and local sightseeing trips (valued at A$850) and leather travel set (valued at A$2,500) for Mrs Gilling. The final contract negotiated with Alesse includes the following terms: Bronx will be the sole supplier of Alesse lighting systems in Australia for five years from 1 March 2015, and Bronx will pay $85,000 for the sole agency rights of sale and distribution. Bronx must establish a showroom in the Sydney CBD to display only the Alesse brand of lighting systems. Mrs Gilling, with her son and daughter, will travel to Italy once every 12 months to attend the annual launch of the Alesse product range (INSTITUTE OF FORESTERS OF AUSTRALIA, 1936).

Together with her son and daughter, Mrs Gilling will travel to Italy annually so as to launch the Alesse product range. Certain costs have to be factored for in the entire movement plan to ensure that the strategic plans and processes are clearly put in place. All the other cost for travelling will be paid by Bronx. Since much of the cost will be catered for by Bronx, the cost of attending the annual meeting will be low, and some other costs that can be realized only includes costs such as personal upkeep (NETHERCOTT, L., RICHARDSON, G. A., & DEVOS, K, 2010).

The cost of travel, accommodation to attend the annual launch and food while travelling will be paid by Bronx. It is envisaged that Mrs Gilling, her son and daughter will all attend the launch but also do some sightseeing during their stay (RODGERS & LUCAS, 2011). Product support, information sheets and marketing material will be supplied by Alesse for a fee payable by Bronx. A charged fee of $5,000 irrespective of the amount of support provided by Alesse. Alesse will send the marketing manager from the Italian head office to Australia each year to be available to Bronx for sales pitches and marketing campaigns (CHRISTENSEN & DUNCAN, 2009). Bronx will pay for the cost of the marketing manager’s travel and accommodation for the month that he is in Australia.

To fund the purchase of the new showroom, Mrs Gilling decided to sell 20% of her shares in Bronx on 1 February 2015 to an arms-length investor for $1,200,000 (NOLAN, 1996). The $1,200,000 was paid to Mrs Gilling in instalments of $400,000 in each month of February 2015, May 2015 and August 2015. It was also the legal fees associated with the sale of 20% of the shares in 2015 of $9,900 were paid by Mrs Gilling but reimbursed by Alesse. Mrs Gilling had initially acquired 100% of the shares in Bronx in January 2000 for $256,000 from her ex-husband after their divorce was finalised (BENNETT, 1963).

Although the shares 3 in Bronx was independently valued at $350,000 as at January 2000, Mrs Gilling’s ex-husband applied a discount to the sale price due to the upsetting personal circumstances. Mrs Gilling incurred legal fees associated with the purchase of 100% of the shares of $3,500 (COCKBURN & WISEMAN, 1996). A new showroom was purchased for $1,500,000 by Mrs Gilling on 1 March 2015 and is made available to Bronx to display the Alesse lighting systems. Mrs Gilling charges rent to Bronx at a commercial rental cost however before the showroom could be used by Bronx. Mrs Gilling had to arrange a coat of paint ($6.600) and new flooring ($16,600) throughout the premises on 10 March 2015. One month into the agreement, the showroom was damaged by a wild hail storm resulting in the closure of the showroom for three weeks for repair (costing $75,000) (NATIONAL LIBRARY OF AUSTRALIA, & COMMONWEALTH NATIONAL LIBRARY (AUSTRALIA), 1945).

Later the structural work to the building (costing $166,000). Bronx claimed compensation from its insurance company to cover the cost of the repairs and structural work. The insurance company argued that the need for the fundamental occurred when the premises was purchased by Mrs Gilling. Accordingly the insurance company would not pay the claim for the total amount (MARTINDALE-HUBBELL (FIRM), 1993).

Ultimately Mrs Gilling settled for a payment totalling $85,000 to cover both the repairs and structural work to the building. The Italian marketing manager, Silvio, came to Australia with his wife and two children on 1 April 2015 and loved it so much that they decided to stay in Australia indefinitely. Silvio resigned from his employment with the Alesse and took on part-time work in Australia until something more permanent arises. Silvio does own an investment property in Italy but does not own a family residence there. The two children will attend school in Australia and Silvio, and his wife are looking at purchasing an apartment in Sydney. Alesse pays Silvio a lump sum of $60,000 for Silvio’s promise not to work for a competitor in the next 12 months starting 1 April 2015 (DOERNBERG, 2001).

Reference List

ROBERT, J.K. (1880). The Australian law times. Melbourne, Charles F. Maxwell.
AUSTRALIAN INSTITUTE OF BANKERS, & AUSTRALIAN INSTITUTE OF BANKING AND FINANCE. (1984). The Australian banker: journal of the Australian Institute of Bankers. [Melbourne], The Institute.
BENNETT, J. M. (1963). The Australian digest: being a digest of the reported decisions of the Australian courts and of Australian appeals to the Privy Council. Sydney, Law Book Co.
CARNEY, T. (2006). Social security law and policy. Annandale, N.S.W., Federation Press.
CHRISTENSEN, S. A., & DUNCAN, W. D. (2009). Sale of businesses in Australia. Annandale, N.S.W., Federation Press.
COCKBURN, T., & WISEMAN, L. (1996). Disclosure obligations in business relationships. Sydney, Federation Press in association with the Centre for Commercial and Property Law, Queensland University of Technology.
DOERNBERG, R. L. (2001). Electronic commerce and multijurisdictional taxation. The Hague [u.a.], Kluwer Law International.
LAWYERS CO-OPERATIVE PUBLISHING COMPANY. (1919). American law reports annotated. Rochester, N.Y., Lawyers Co-operative Pub. Co.
MARTINDALE-HUBBELL (FIRM). (1993). Martindale-Hubbell international law digest. New Providence, NJ, Martindale-Hubbell.
NATIONAL LIBRARY OF AUSTRALIA, & COMMONWEALTH NATIONAL LIBRARY (AUSTRALIA). (1945). APAIS, Australian public affairs information service; a subject index to current literature. Canberra, National Library of Australia.