The Tax Commissioner, Michael Carmody, recently spoke on "Corporate governance and its role in the taxation area".
As well as remarks on corporate governance, particularly in relation to large corporates, Mr Carmody's address included comments on the operation of the general anti-avoidance provision, Part IVA.
Mr Carmody set out a Part IVA checklist of questions for Boards to ask to assist them in assessing the tax risks associated with particular proposals.
Some quotes:
"It was less than two years ago that I raised managing the tax risk as a governance issue for corporations and their Boards...
Since raising the issue I have sought to reinforce and support more conscious tax risk management by writing directly to the Chairmen of Boards of Australian listed companies; by giving Boards confidence that tax risk analysis papers prepared for them will remain confidential; and more recently by developing cooperative and time sensitive arrangements for private rulings on issues of concern to Boards...
In essence, tax risk management is about the level of comfort a corporation has that they will not face substantial liabilities following a review by the Tax Office, or if they do, about the level of comfort they have they will succeed on appeal to the Courts...
the High Court has confirmed the originally intended and articulated scope of Part IVA as applying to contrived arrangements rather than ordinary family or commercial dealings...
The High Court has further confirmed that Part IVA can apply if the particular means to achieve a commercial end involves contrived steps that are only explicable by their claimed tax benefit. To do otherwise would be to leave a gaping hole in the effectiveness of Part IVA in protecting the integrity in the operative provisions of the law..."
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