International Taxation

Running head: INTERNATIONAL TAXATION
International Taxation
Name of the Student
Name of the University
Author Note

INTERNATIONAL TAXATION1
International taxation implies a system of taxation that is to be applied to an individual as
a part of the international community who has been involved in the international trade and
commerce. These individual taxpayers include a person, business or even government
agencies. Every country has their own structure designed for the taxation of the international
transactions. In Australia, the structure for the international taxation can be pointed out
through two situations. Firstly, any person who has been a foreign resident doing business in
Australia and secondly a resident of Australia who has been carrying out business
transactions overseas. The tax incidents with respect to such income will be considered with
respect to the tax treaties that has been existing between the different countries.
Issues
This system of taxation has although has been imposing the tax liability upon the taxpayer
who has been operating globally but has been suffering from certain inadequacies. The main
concern with respect to international taxation is the issue of transfer pricing. Transfer pricing
implies a situation where two companies having a common management has been involved
into transactions among themselves charging a particular price for such transactions. This can
be construed as an issue from the perspective of international taxation as most of the entities
channelizing there profits towards the tax havens for the purpose of avoiding the liability of
taxation. This includes the profits to be shifted towards a subsidiary located in a tax haven by
the holding company vice versa. This is because the entities are involved in charging nominal
prices while affecting transaction with respect to items, has not been transferred by them in
that particular price if the same has been sold in the market. The various endeavours of the
entities for the purpose of avoiding taxes has been posing a serious concern among the
economies of the world. Again any entity which has been availing items from any holding
and subsidiary company of its own is indulging into transactions for excessive prices. This
would increased their expenses while assessing their taxability which would result in less

INTERNATIONAL TAXATION2
amount of taxes being charged. Moreover loans have been advanced to search commonly
managed entities located in tax economic zones without any interest or with the minimum
amount of interest will also be regarded as a tax avoidance scheme. This form of tax
avoidance is referred as base erosion and profit shifting (BEPS) (www.ato.gov.au, 2019).
Law
There has been an all round reform in the transfer pricing system laws in Australia.
Subdivision 815 of the Income Tax Assessment Act 1997 (Cth) has introduced laws relating
to self assessment of transfer pricing benefits and has introduce the arm's length condition
that needs to be ensured while setting transfer prices. This requires an entity to comply with
the market rates of items while computing there transfer pricing rates. Under sub division
284E of the Act has been an introduction of maintenance of records that are to be
compulsorily followed by entities who has been involved in making international transactions
with the commonly controlled subsidiary or holding company. The government of Australia
has proposed to have subject their tax laws to further amendments for the purpose of
combating base erosion as well as profit shifting relating to non arm’s length. The
government has announced to bring Australia at the forefront with respect to all the
jurisdictions in the world who has been combating tax avoidance. Various measures has been
introduced by the government for the purpose of addressing the tax avoidance issues.
Australia has their own set of general anti-avoidance rule which apply to the foreign resident
taxpayers. There has been a requirement for the taxpayers to comply with the Organisation
for Economic Corporation and Development regime of reporting (www.ey.com, 2019).
Cases
In the case of Google Australia the channelizing of profits towards tax economic zones has
been made evident. In this case the concern of transfer pricing as effected by Google