Tax Law Research Group

Summary

Regulating cryptocurrencies is a challenge for policymakers around the world. This project examines the challenge faced by Australian policy-makers in designing an appropriate regulatory framework for cryptocurrencies that can detect money laundering, prevent revenue leakage and protect unsuspecting consumers from scams.

Researchers

• Professor Julie Cassidy (University of Auckland)
• Dr Toan Le

Project background and aims

A part of the difficulty of designing an appropriate regulatory framework to regulate cryptocurrency in Australia requires regulators to understand what cryptocurrencies actually entail. To date, there is no clear and authoritative definition of a cryptocurrency. Cryptocurrency have no physical form. They are entirely digital. Their very existence lies in the data strings that represent each ‘coin’.

Cryptocurrency exist in a decentralised system without an intermediary party such as a bank. Instead each cryptocurrency transaction is contained in its own network. Each time a person interacts with a cryptocurrency, their computer joins that network to record the transaction. Computers in the network are constantly updating the information and sealing of the recorded parts of the digital ledger by encrypting the record using complex mathematical algorithm.

The unique nature of cryptocurrency makes it difficult for regulators to determine which aspects (if any) require regulation and, if so, how to control and monitor activities to protect consumers and prevent tax evasion and money laundering. This project will critically analyse the regulatory framework used to regulate cryptocurrency in Australia. The objective is to draw out weaknesses in the existing regulatory framework and to recommend reform options.

Methodology

This project will apply doctrinal legal and research methods to provide a comprehensive analysis of legislation and case law governing cryptocurrency under Australian taxation, financial services and consumer protection law. The research will extend to practices in regulating cryptocurrency adopted in other developed and developing countries including the United States and United Kingdom.

Output

• Cassidy, J., Cheng, M. H. A., Le, T., & Huang, E. (2020). A toss of a (bit)coin: the uncertain nature of the legal status of cryptocurrencies. eJournal of Tax Research, 17(2), 168-192.

• Cassidy, J., Cheng, M. H. A., Le, T., A Toss of A (Bit)Coin: The Uncertain Nature of the Legal Status of Cryptocurrencies, Proceedings of Asia Conference on Business and Economic Studies (ACBES) by University of Economics Ho Chi Minh City on 8th – 9th Sep 2018 at Ho Chi Minh City, Vietnam.

Summary

We argue that the profit creation runs in the genes of firms, and the conflict of profit genes and Darwinian fitness may be considered for policymaking on the tax-avert MNE behaviour.

Researchers

• Dr Shafi Khan
• Dr S Bruce Thomson (Adjunct Faculty member MacEwan University; Lecturer Federation University; RA Monash Business School)

Project background and aims

The project aims to trace biological nature of firm organization and investigates Darwinian rationale in the cost-induced behaviour of multinational enterprise (MNE), presuming taxes as its business costs. Despite the fact that organizational science is acknowledged as an inherently interdisciplinary field it rarely transplants insights from biology. The project aims to undertake this task in express terms. Business organizations struggle and compete to maximize profits as do living organisms for resources for survival. Based on the Friedmannian thesis that the sole purpose of firms is to maximize profits, it could be posited that the process of profit creation “runs in the genes” of business organizations.

In that framework, costs of a firm should be potentially in conflict with its profit genes and Darwinian fitness. If tax is a business cost, is Darwinian rationale also at work in the organizational behavior in the MNEs which operate transnationally across borders where country to country tax costs may vary significantly?

If the profit gene model and the ensuing Darwinian rationale holds in the cost-induced behaviour of business organizations, it poses policymaking challenges in dealing with MNEs since hardly any global policy regime at present considers the underlying genetic evolutionary construct of MNEs. To that end, the project dissects the case of business organization as a Darwinian entity and the genetic foundations of MNEs tax avoidance behaviour to explore its policy implications.

Methodology

The project uses interdisciplinary methodological tools at the interface of biology, organisational science, economics and tax policymaking. In examining the biological nature of business organizations, the study employs tools of analogical reasoning based on the economics of the nature of firm and organizational ecology. In exploring the cost induced dynamics of firms, we advance a profit-genes model to dissect the tax avert behaviour of MNEs. To investigate the policy implications of anti-avoidance genetic MNE behaviour, we apply the Tinbergenian behavioral rationale of proximate and ultimate causation.

Summary

The project examines EU proposed legislation to tax digital business models, and analyses its legal, political and economic implications.

Researcher

• Dr Shafi Khan

Project background and aims

This project examines the proposed EU legislation on taxation of digital businesses. Since the existing international rules fail to capture the “taxable presence” of digital firms, finding solution to that problem is a key component of the ongoing OECD/G-20 Base Erosion and Profit Shifting (BEPS) project. Given the transnational nature of the problem, the ideal solution lies in a multilateral action as foreseen under the BEPS project. However, due to lack of global consensus, nations are taking unilateral actions worldwide. The proposed EU legislation is one of them.

The project aims to investigate the proposed EU law on the taxation of digital economy. Using content analysis research method and comparative approach, it will identify the strengths and weaknesses of the draft EU tax law. The project will contribute to the body of knowledge on one of the hottest tax topics in the international tax realm, having far-reaching implications both for the governments and digital industry. For businesses, such as for the Silicon Valley, key concerns lie in, for example, the "ring-fencing" of the digital economy (a treatment separate from the wider economy) as well as additional compliance burdens. Implications for governments, on the other hand, are fairly straightforward but profound, if such legislation is adopted in EU and other jurisdictions as it triggers a shift in the allocation of nations’ rights to tax cross-border digital business activities as home and host jurisdictions. Against that backdrop, the project investigates legal, political and economic implications of the proposed tax legislation.

Methodology

In examining the proposed EU measures, the project will analyse the qualitative data in the form of official documents of European Commission, statutes, case law, legal reports, OECD work, discussion papers, etc relating to the policy area of digital taxation. By applying a mix approach, content analysis of that data, legal and political discourse, and economic analytical method will be adopted. Also, insights from policymaking and evaluation methods, in particular those incidental to taxes, will be used to examine prospects and implications of the draft legislation in question

Summary

Tax authorities in common law countries such as Australia are increasingly digitising and automating their tax compliance activities and taxpayer service interactions. The move is rapid and multi-faceted extending to core functions including tax compliance and investigation activities. However, this increasing reliance on digitisation, automation and artificial intelligence raises fundamental questions concerning tax authority accountability and the ability of taxpayers to exercise their rights to take legal action in the event of defective exercises of tax authority powers. These questions have to date garnered little attention in the evaluation of the merits, efficiencies and goals of the push to digitise and automate. This project considers these questions and posits that the answers indicate the need to rethink a range of legal and public policy principles underpinning the limits of tax authority susceptibility to taxpayer suit and give rise to a number of new legal controversies that are likely to gain increasing prominence in a ‘digital by default’ tax administration world.

Researcher

• Dr John Bevacqua

Project background and aims

Tax authorities in common law countries including Australia, Canada, the UK, the United States and New Zealand have all committed strategically to interacting with taxpayers in a digital by default mode and are working apace to achieve these objectives. For example, the UK HRMC claims to have applied robotics and AI to assist in over 15 million tax administration functions in the last two years alone. The ‘digital by default’ tax administration push has, in part, been driven by economic constraints and the presumption that emerging electronic tools for interacting with taxpayers and carrying out core tax compliance monitoring functions are more cost effective than their traditional counterparts.

Whilst commentary and statistics touting the efficiencies and benefits of the widescale transition to digitised and automated tax administration functions are plentiful, detailed investigations into the effect the transition to this new digital by default tax administration frontier might have on previously well-established legal principles and theories concerning the trade-off between taxpayer rights and tax authority accountability are comparatively rare. In particular, there has been no discussion of the question of the extent to which the shift to more automated digitised means of interacting with taxpayers warrants revisiting the boundaries of immunity from suit traditionally afforded to tax officials and tax authorities and the public policy concerns which underly the setting of those limits. Redressing this ostensible oversight is the primary focus of this project.

Methodology

The project will apply doctrinal legal research methods to provide a systematic exposition of the rules governing tax authority accountability in cases of defective administration and the effects of digitisation on the future development and application of those rules. This will require substantial ‘black letter’; (or literal) analysis of formal legal rules and principles (essentially the project ‘data’) and the application of deductive legal reasoning to develop arguments and reasoning based on the law (including both legislation and case law). The research will extend to multiple key common law jurisdictions including Canada, the United States, the United Kingdom, New Zealand and Australia.