1. 10 th Anniversary of The Chamber of Tax Advisers Russia International Tax Congress Marriott Grand Hotel, Moscow 2 & 3 February 2012 Mr Gil Levy – President Asia-Oceania Tax Consultants’ Association

2. 1.AOTCA – INTRODUCTION HISTORY PURPOSE RECENT ACTIVITIES

3. 2.THE TAXPAYERS CHARTER JOINT VENTURE AOTCA, STEP, CFE RESPONSE TO ‘GLOBALISATION’ OF REVENUE AUTHORITIES IMPETUS – CFE’s 50 TH ANNIVERSARY PUBLICATION OF TAXPAYERS' RIGHTS IN THE EU AND AUSTRALIAN TAXPAYERS CHARTER QUESTIONNAIRE 50 COUNTRIES

4. 3.AREAS COVERED EXISTING TAXPAYERS CHARTER TAX ADMINISTRATION IN GENERAL TAX FILINGS ASSESSMENTS AUDITS APPEALS ASSISTANCE

5. 3.AREAS COVERED (continued) SERVICE STANDARDS RULINGS AND INTERPRETATIONS TAXPAYER RECORD CONFIDENTIALITY PRIVACY DEALING WITH THE TAX ADMINISTRATION BURDEN OF PROOF

6. 3.AREAS COVERED (continued) DRAFTING LEGISLATION RETROSPECTIVITY DOUBLE TAXATION INTEREST AND PENALTIES DEVELOPMENT OF TAX LAWS

7. 4.CHARTER DEALS WITH RIGHTS AND OBLIGATIONS

8. 5.SHOULD BE LEGALLY BINDING AUSTRALIA ASPIRATIONAL

9. 6.APPLIES TO ALL TAXES

10. 7.END GOALS WORLD WIDE STANDARD

11. 8.TRENDS IN TAX POLICY – AUSTRALIA LATEST REVIEW KNOWN AS THE HENRY REVIEW – AUSTRALIA’S FUTURE TAX SYSTEM “ROOT AND BRANCH” REVIEW – SOMEWHAT ASPIRATIONAL

12. 8.TRENDS IN TAX POLICY – AUSTRALIA (continued) NEW AGE THINKING – RECOMMENDATIONS 1.40% DISCOUNT IN RATE OF TAX ON SAVINGS 2.ELIMINATE WITHHOLDING TAX ON FINANCIAL INSTITUTIONS OPERATING IN AUSTRALIA 3.REDUCE THE RATE OF TAX ON SUPERANNUATION FUND EARNINGS FROM 15% TO 7.5% 4.40% RESOURCES SUPER PROFITS TAX ON THE MINING INDUSTRY (This has been taken up – but may not last)

13. 9.OTHERS 5.BUSINESS LEVEL EXPENDITURE 6.REPLACE DIVIDEND IMPUTATION WITH A SHAREHOLDER TAX I.E. ON DIVIDEND 7.BROAD BASED CASH FLOW TAX DESIGNED ON A DESTINATION BASIS

14. 10.THE TRADITIONAL APPROACH BROAD-BASED / LOW-RATE AUSTRALIA 1980’s CGT, FBT TAX ON SUPERANNUATION CONTRIBUTIONS CFC AND FIF THE LOWER THE RATE THE LESS EFFECT TAX HAS ON INVESTMENT DECISIONS ALL TREATED EQUALLY IF INCENTIVES ELIMINATED REVIEW RECOMMENDS REMOVAL OF EXEMPTION ON FOREIGN EARNED INCOME, TAX SUPER CONTRIBUTION STRENGTHEN PERSONAL SERVICES INCOME RULES.

15. 11.THE NEW WAVE BROAD BASED DOESN’T MINIMISE ECONOMIC DISTORTIONS ECONOMIC DISTORTIONS DEPEND ON MARGINAL ELASTICITY'S DIFFERENTIATION MAY BE PREFERABLE

16. 12.EXAMPLES TOP PERSONAL RATE SHOULD BE ZERO INCOME TAX IS A TAX ON CONSUMPTION WHAT IS SPENT BECOMES EARNINGS. TAXING INCOME FROM SAVINGS IS DOUBLE TAX WHEN SAVINGS ARE SPENT TAXING SAVINGS INCOME LEADS TO OVER CONSUMPTION IN EARLIER PERIOD

17. 12.EXAMPLES (continued ) DIFFERENTIATING TAXES BETWEEN MALES AND FEMALES – FEMALE TAX RATES SHOULD BE LOWER TAX OWNER OCCUPIED HOMES MORE AFFORDABLE FOR YOUNGER FAMILIES US EXPERIENCE

18. 13.CORPORATE TAX ALLOWANCE FOR CORPORATE EQUITY o ELIMINATES DISTINCTION BETWEEN FINANCING BY WAY OF DEBT OR EQUITY CASH FLOW CORPORATE TAX o REAL CFCT – TAX ALL REAL RECEIPTS AND ALLOW DEDUCTION FOR ALL EXPENDITURE – INTEREST IS NON DEDUCIBLE NON-ASSESSABLE

19. 13.CORPORATE TAX (continued) A CFCT AND ACE IMPLIES ONLY ECONOMIC RENTS WILL BE TAXED CORPORATE TAX CAN BE DEFERRED INDEFINITELY BY RE-INVESTMENT OF PROFITS IN ASSETS AND IS PRO-GROWTH

20. 13.CORPORATE TAX (continued) ALTERNATIVE CFCT INCLUDING ALL OUTFLOWS AND INFLOWS THEREFORE ONLY TAX INCREASE IN EQUITY DIFFICULT TO INTEGRATE WITH OTHER INCOME TAX JURISDICTIONS

21. 14.COMPARISON – EXAMPLES INCOME TAX BORROWING$100 PRICE$100 INCOME $10 X 10$100 INTEREST EXPENSE $10 X 10($100) SALE PROCEEDS$100 TAX BASE NIL TAX @ 30% NIL

22. IF FUNDED BY EQUITY TAX BASE $100 TAX @ 30%$ 30 UNDER ACE EQUITY DEDUCTION WOULD BE $100 THUS REDUCING TAX BASE TO NIL

23. ALTERNATIVE UNDER CFCT RESULT THE SAME SUBSCRIBED CAPITAL$100 COST OF ASSET ($100) INCOME $10 X 10$100 TAX BASENIL TAX @ 30%NIL THIS IS WHY CFCT IS CALLED AN EXPENDITURE TAX

24. 15.AUSTRALASIAN IMPUTATION SYSTEM CORPORATE TAX ONLY A WITHHOLDING TAX AN EXCESS TAX AT CORPORATE LEVEL IS REFUNDED NON-RESIDENTS AFFECTED