Editorial
The 2025 Volume 27(3) issue of the Journal of Australian Taxation contains five very interesting and yet diverse articles relating to taxation law in Australia, New Zealand, South Africa and Canada.
The first article by Lisa Marriott explores the OECD report outlining ten principles for fighting tax crime that was published in 2017 coupled with a second edition published in 2021 which provides a framework to assist countries in improving tax compliance. The OECD also published a Tax Crime Investigation Maturity Model to help tax authorities self-assess their capabilities to address tax crime. Adopting a descriptive approach and using official documents and information obtained under the Official Information Act 1982, this article uses the OECD framework and the OECD Tax Crime Investigation Maturity Model to evaluate New Zealand’s approach to fighting tax crime. It also provides a critique of the OECD principles and offers suggestions to improve the operationalisation of the principles. The article recommends that future OECD reports include more precise measures of performance, as the principles currently indicate potential, rather than actual performance. Lisa Marriott contends that the principles would further benefit from greater acknowledgment of the potential for technology in addressing tax crime.
The second article written by Muneer Hassan contends that the existing South African VAT Act is intricate to instruct, implement and administer, and exhibits a need for profound improvements. His empirical study presents guidelines to improve the VAT Act, which entails following the lifecycle of a VAT vendor, organising sections into groups, incorporating headings and subheadings, providing clear signposting, and finding the most effective solution to address local challenges. His recommendation also included in the guidelines is that these guidelines should be used to construct a descriptive framework to the VAT Act. This study presents a descriptive framework to re-organising the VAT Act utilising the guidelines employing applied qualitative research as the research methodology. Recommendations provided by interviewees were integrated to improve the descriptive framework. The constructed descriptive framework to the VAT Act marks the first stage in the process of simplifying the South African VAT Act.
The third article is written by Peter McMahon and Aleks Zochowski and examines the precise geographical limits of Australia’s primary indirect tax laws, the Goods and Services Tax (GST) and stamp duty which they contend is of critical importance to taxpayers operating in its coastal waters. In particular this article examines the myriad and diverse Federal, State and Territory laws that are primarily relevant to the identification of those geographical limits. Regarding GST, the article considers the precise meaning of the phrase ‘indirect tax zone’ in the GST legislation and determines that it is only those supplies that are connected with the first 3 nautical miles of Australia’s 12 nautical mile ‘territorial sea’ that fall within the GST net. The authors consider that this position is at odds with clear Parliamentary intention which was to ensure GST applied to supplies connected with the full 12 nautical miles of the territorial sea. They recommend that amending legislation ought to be introduced to clarify the position, and to dispel any uncertainty for taxpayers as to the GST treatment of activities carried out in the country’s full territorial sea. The article then goes on to consider the precise geographical scope of the stamp duty laws of the States and the Northern Territory, and whether stamp duties may be levied on transactions over property located on, in or under a jurisdiction’s coastal waters sea bed. In that regard, the article considers the Duties legislation of each state and the Northern Territory separately.
The fourth article is written by Francois Vaillancourt. He presents evidence on the evolution of both the complexity of the personal income tax system and the compliance costs incurred by personal income tax filers (PIT) in Canada. The complexity is measured using three indicators: length of federal income tax code (1971-2018), number of federal PIT expenditures (1981- 2014) and length of PIT forms (2000-2015). All three indicators show an increase in complexity. The compliance costs of the PIT are calculated using survey information gathered from individual Canadians on time expanded and amount spent the following year for the 1985, 2007, 2018 and 2022 tax filing /calendar years. His results show a decrease in the PIT compliance costs in hours, in total value and as share of GDP and revenues collected. This drop in compliance costs is most likely due to the increasing use of software by tax filers to prepare their tax returns; this allows them, amongst other things, to download information from the Revenue agencies. A tax pain index combining complexity and compliance costs is put forward; its small growth over time may well explain why increasing tax complexity of the PIT in Canada is apparently well tolerated. The article ends with a short review of similar Australian evidence.
The fifth article is written by Dale Boccabella and Norman Hanna. The authors undertake a very detailed analysis of the ‘Charles Apartments’ case which involved the deductibility of an ‘amount’ incurred by a group company in the context of a property development group heavily indebted to an outside lender, and that lender holding loan guarantees from all group companies. The group was not consolidated for income tax purposes. Upon the sale of its only asset, the group company paid the net-proceeds to the outside lender to reduce the group’s overall debt, yet the group company had a loan on foot from another group company to fund development of its only asset. There were differing views between the AAT and the Federal Court of this underlying general law payment transaction, namely, the AAT holding that it was (in part) an interest payment to the intra-group lender and the Federal Court holding it was a payment under the guarantee to the outside lender. From those positions, the income tax deductibility outcome also differed. This article deals with this difference of approach between the AAT and the Federal Court, an issue of considerable significance to similarly placed groups. The article also identifies and discusses what appear to be anomalies and inconsistencies in the litigation to date.
John McLaren, John Minas and Sonali Walpola
Editors 2025