PACC6006 Taxation Law S1: Qantas Corporate Tax Position Analysis

This report provides a professional analysis of the corporate tax issues surrounding Qantas, prompted by recent media speculation regarding the airline's tax payments. It examines the claims made by the ABC, contrasting them with Qantas' defense, which cites historical losses and the structure of the Australian tax system. The report references relevant legislation, including the Income Tax Assessment Acts of 1986 and 1997, and relevant case law to evaluate whether Qantas' actions constitute tax evasion or are permissible under current tax laws. The analysis considers the impact of losses, shareholder payments, and the aviation industry's financial volatility on Qantas' tax liabilities, ultimately offering a judgment on the validity of the claims and suggesting potential policy improvements to balance corporate interests with tax obligations. Desklib provides a platform to access this and many other solved assignments for students.

Running head: TAXATION LAW
Professional Report
Name of the Student
Name of the University
Author Note

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Table of Contents
Professional Report..........................................................................................................................2
Statement of the problem:............................................................................................................2
Legislation:..................................................................................................................................3
Facts of the case...........................................................................................................................4
Cases:...........................................................................................................................................5
Solution/ judgment:.....................................................................................................................5
Reference:........................................................................................................................................7

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Professional Report
Title: paying of no corporate tax
Statement of the problem:
The main problem regarding this report is to find out the problems and issue relating to
the non-payment of corporate tax by many companies. In order to state any clear statement on
the topic, it is important to evaluate the norms of paying taxes and the aspects of non-payment of
corporate taxes to this effect (Dyreng, Hoopes and Wilde 2016). Corporate tax is a direct tax that
has been imposed on the corporate sectors regarding their income and capital wealth. This tax
can be referred as income tax or capital tax. In general, such taxes are imposed on the company if
the following terms are fulfilled:
 The company has been incorporated within the territorial jurisdiction of the
country;
 The company is earning profit within the territorial jurisdiction of the country;
 Any foreign companies that are professing business permanently from the
country;
 Any company deemed as resident of the country.
Taxes are imposed on net profit and the rate of tax is depending on the territorial capacity
of each country. in Australia, corporate taxes owe a greater significance as a major portion of the
country’s taxes are derived from corporate tax (Christensen et al. 2015). However, it has been
observed that most of the big companies are avoiding these tax criteria. According to a report
published by the ABC news, a major portion of the aviation industry and large corporate tycoons
has not paid corporate taxes. It has been observed from the report that the liberal approach of the

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Australian government has enabled the companies to get relief from historical losses they have
sustained in the recent past (Cen et al. 2017). Further, the tax system of Australia allows the
companies to make certain offset against their future profits. These techniques helped them to be
a part of the zero corporate tax liabilities. the main problem that has been arisen in this case is
that the airlines industry are quite expensive in nature and huge risks are involved in it. the
airlines industry is falling under the purview of highly competitive industry and losses are quite
frequent in this industry and the capital investment is quite huge (Aronson, Lambert and
Tremblay 2016). It has been observed that the tax rate in Australia is imposing on the
corporations in a disproportionate manner.
Legislation:
The main governing Act regarding the levy of corporate tax in Australia is Income Tax
Assessment Act 1986 and Income Tax Assessment Act 1997. Corporate taxes are depending on
the profits of the company. A sum up of 30% has been imposed on the net profits of the
companies; however, the said tax rate has been reduced by 25% in the year 2016 by the
Australian government. However, according to the Act, rate of the tax is depending on the rate of
profit a company has been earned (Armstrong et al. 2015). Dilemma arose in case where the
companies are running in losses. It has been observed that the companies had to face serious loss
in the last financial year in Australia and the aviation industry had to consume serious damage
due to this. According to section 165 of the Income Tax Assessment Act 1997, the corporate tax
will be levied on annual earning of the companies. The companies are under an obligation to pay
taxes to the government. The companies should have to face trouble in case of non-payment of
corporate tax (Richardson, Taylor and Lanis 2015). However, problem arises when the
companies have to face troubles due to financial downturn and the taxation policies of the

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government have become quite liberal due to the same. It has been reported that many companies
had not paid any taxes since 2013 and the tax burden in Australia become high. Further, it has
been observed that many companies are running with profits at the present condition and still are
not paying taxes. It has been mentioned by the amendment provision of Treasury Laws
Amendment (Enterprise Tax Plan Base Rate Entities) Bill 2017 that the rate of lower corporate
tax limit should be limited. According to this Bill, the small business entities can enjoy the tax
rate of 27.5%.
Facts of the case:
Allegations have been made against Qantas regarding evasion of taxes. It has been
observed that many airlines companies including Qantas do not pay corporate taxes on regular
basis. Many reporters have analyzed the facts and stated that the Australian government has
allowed the aviation industries not to pay corporate tax because the industry was running in loss.
It has been observed that Qantas has delivered 18% net profit and the amount of the same has
been reached $607 million. It has been stated by the corporate heads of the aviation industries
that losses are quite frequent in case of aviation industry and many airlines companies are
running into loss (Richardson 2015). No corporate tax liabilities will give certain relief to the
companies as the rate of tax is depended on the net capital of the company and it is true that huge
capitals are invested in airlines companies. If the tax burdens are imposed on the companies
mandatorily, they will face great difficulties due to this. Therefore, the governmental policies
regarding the tax imposition on the airlines companies are quite liberal in nature. further, it has
been contended by Chief Executive of Qantas, Alan Joyce that the company had to face serious
financial trouble during the past decades. ABC has analyzed the payment of no taxes as the tax
evasion and it has been found that the reporters have failed to consider the losses that the

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company has to face during the financial crisis. Further, ABC has failed to evaluate the principle
of the tax system (Armstrong, Glaeser and Kepler 2016). It has been mentioned that the tax
system is attempt to make an offset regarding the tax liabilities. in addition to this, it can be
stated that the rate of taxes will depend on the profits; therefore, the tax liabilities will be gone if
the company run in loss.
Cases:
According to The West Australian (2017), many big companies in Australia do not pay
corporate taxes. It has been reported that Chevron, Australia does not pay taxes. Similar situation
has been applied to News Corp Australia. Further, ABC News (2018) has demanded that Qantas,
Adani and Energy Australia do not pay corporate tax.
Solution/ judgment:
It has been observed from the report published by ABC that many aviation companies
including Qantas have failed to pay corporate tax for last three years and the companies are
committing the crime related to tax evasion even after making profit from the business. it can be
stated that there are certain loopholes in the report of ABC. According to the Income Tax
Assessment Act 1997, corporate taxes are obtained from the net profits of the company.
However, the companies had sustained losses during the financial year. It is a fact that the
companies are now making profit, but a lump sum amount has been gone to pay the shareholders
(McClure, Lanis and Govendir 2017). The airlines company has to pay $500 million of its capital
to the shareholders. It has been observed that the company is opted to earn $378 million as their
share buyback. Further, a dividend of 7% per share has been given to the investors. The losses
faced by the company were huge and therefore, the company is not in a position to start the
payment of corporate tax any longer. However, according to the chairperson of the company, the

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company can start the payment of taxes from the next year. If corporate taxes are imposed on the
companies mandatorily, there is a huge opportunities of unemployment could be taken into
place. Further, if the companies could not make profit, it could not generate income from the
business. Everyone will be suffered due to the same. Therefore, the government is required to
develop a good tax program so that the interest of the companies can be secured in nature. it has
been mentioned by the ABC that “A tax credit is available to resident shareholders who receive
the dividends to reflect the tax already paid at the corporate level (a process known as dividend
imputation). A withholding tax applies on unframed dividends paid to non-resident
shareholders.” However, in the absence of business amicable taxation system, the corporate tax
related issues could never be stopped.
Therefore, it can be stated that the government should have to take certain policies so that
the tax rate could not become burden to the companies and the government is liable to
standardize the taxation criteria (Dowling 2014). The burden of the companies should be
considered and issue related to the shareholders and investors should be taken into account.
Imposition of tax all on a sudden is quite arbitrary in nature. Therefore, it is to be stated that until
all the debts are not being repaid to the investors, no corporate tax could be imposed on the
companies.

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Reference:
Armstrong, C., Glaeser, S. and Kepler, J.D., 2016. Strategic reactions in corporate tax avoidance.
Armstrong, C.S., Blouin, J.L., Jagolinzer, A.D. and Larcker, D.F., 2015. Corporate governance,
incentives, and tax avoidance. Journal of Accounting and Economics, 60(1), pp.1-17.
Aronson, J.R., Lambert, P.J. and Tremblay, V.J., 2016. The Potential for Short‐Run Shifting of a
Corporate Profits Tax. Bulletin of Economic Research, 68(1), pp.1-15.
Cen, L., Maydew, E.L., Zhang, L. and Zuo, L., 2017. Customer–supplier relationships and
corporate tax avoidance. Journal of Financial Economics, 123(2), pp.377-394.
Christensen, D.M., Dhaliwal, D.S., Boivie, S. and Graffin, S.D., 2015. Top management
conservatism and corporate risk strategies: Evidence from managers' personal political
orientation and corporate tax avoidance. Strategic Management Journal, 36(12), pp.1918-1938.
Dowling, G.R., 2014. The curious case of corporate tax avoidance: Is it socially
irresponsible?. Journal of Business Ethics, 124(1), pp.173-184.
Dyreng, S.D., Hoopes, J.L. and Wilde, J.H., 2016. Public pressure and corporate tax
behavior. Journal of Accounting Research, 54(1), pp.147-186.
Guess Which Huge Companies Haven't Actually Paid Corporate Tax In Years. (2018). Junkee.
Retrieved 28 April 2018, from http://junkee.com/big-companies-zero-tax/146772
McClure, R., Lanis, R. and Govendir, B., 2017. Analysis of Tax Avoidance Strategies of Top
Foreign Multinationals Operating in Australia: An Expose.

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Richardson, D., 2015. Corporate tax avoidance. The Australia Institute, pp.1-16.
Richardson, G., Taylor, G. and Lanis, R., 2015. The impact of financial distress on corporate tax
avoidance spanning the global financial crisis: Evidence from Australia. Economic
Modelling, 44, pp.44-53.