BULAW5916 Taxation Law & Practice Assignment

Posted on February 12, 2022 by Cheapest Assignment

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Question 1 

Explaining the meaning of Black Economy and Sharing Economy

Black Economy

The black economy can be defined as the section of a Nation’s economic activity which is a derivative from sources that are outside the purview of rules and regulation of a country with regards to trade and commerce (Cannon and Summer, 2015). On the basis of the goods and services involved, these activities can be regarded as legal or illegal. 

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For example, if the payment of the construction worker is done under the table, he will neither have taxes withheld nor will the business pay taxes on the income of the worker. The construction work here is lawful; it is the default in payment of taxes that constitutes this event as a part of the black economy. The unlawful weapons exchange is also a case of the Black economy movement which is illicit. 

The black economy is formed by the business of those goods and services of the black market.  Normally, Black Market emerge when a legislature limits business movement for specific products and services, either by making the exchange unlawful or by making the transaction costly by increasing the tax amount of the same.  To make the item cheaper and to ensure the availability of the banned item in the market, the concept of black market arise (For example, availability of pirated software’s instead of genuine ones)

The Black economy suggests people who work absolutely outside the obligatory/ legislative system or who are known to assess specialists yet deliberately mutilate their cost (and superannuation) duties. The black economy comprises those who are involved in wrongdoing, joining the people who participate in the distribution of banned items. 

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The Black economy is also distinctively known as the underground economy, the non-watched economy or the shadow economy, and definitions can change to combine various activities. It can include things, for instance, undeclared exchange out handwork, cash portions for stock and ventures, and portion for unlawful activities (Evershed 2016). Distinctive terms have been used to define people who fall outside the purview of the tax system. The significance of the black economy used by the Minister of Revenue and Financial Services in their press release is to an extraordinary degree broad, and in our view, would get practices that the Australian Taxation Office (ATO) starting at now endeavours in its ordinary consistency and survey development. It may be advantageous in the normal issues paper, to restrain the convergence of the Taskforce. One possible elective is to consider tax avoidance in place of tax evasion (Evershed 2016). 

There is various component of the black Economy. 

Giving false solicitations: It implies that merchants cite solicitations that can’t be followed on individuals with whom they exchanged.

The other issue is on the 100 dollar notes, and these have been held by individuals who take part in these exercises regardless of being the greater part cash. There has been an expansion in the sham contracts which enable individuals to move crosswise over various occupations to stay away from tax requirements. 

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There are some software’s which are present in the market which reduces the transactions making them untraceable regardless of being given receipts for exchanges. 

Most of the past and current issues of the black economy have for the most part focused on information gathering, general tax issues at the global level.  

Sharing economy 

Sharing economy is a generalized term used for the concept of sharing resources amongst different people, companies and businesses. It is most widely used for describing the social and economic activity in online transactions. It focuses on peer to peer sharing of goods and services. Sharing economy also known as collaborative consumption is an umbrella term used for a variety of asset sharing activities. 

The sharing economy can be termed as an economic model which enables people to borrow or rent resources/ assets owned by someone else or them. It is very helpful for industry or for individual which requires assets whose cost is very high and which is not required on a full-time basis. The collaborative consumption market was valued at USD 260 billion in the year 2016 with new platforms and services being added to it every day (Georgios,  Proserpio, and  Byers, 2016  )

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A few examples of sharing economy are as follows:

  • Car sharing/ car rental: Uber rental, Lyft
  • Dining and hospitality: Airbnb, LeftoverSwap
  • Media & Entertainment: Amazon Family library
  • Logistics: Courier service of e-commerce companies

Many people do not understand that they are liable to pay taxes for sharing economy businesses as well like for hiring a Uber or using BnB (Piesse, 2017). Sharing economy has faced some criticism with regards to regulatory uncertainty. Companies offering these rental services are regulated but there are some unlicensed individuals who are in the business of rental service. The government have very little control over these models hence there is a disparity with regards to the payment of taxes for such businesses. People are not even aware of their tax liability in such businesses. It is a tedious task to manage the sharing economy.   There have been 5  benchmarks which are proposed by the division to which controllers and authorities ought to infer while considering administrative choices. Bearing should strengthen the difference in business activity, not bind it The open entryway should be taken to lessen everything considered control over the visitor economy Poise should be secured some time beginning late government mediates A cross-managerial approach is required to make a useful legal framework. Regulatory responses should be plot in light of strong trial attestation

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Question 2 

Here, we have chosen the transportation industry to explain the concept of sharing economy vis a vis the traditional business model This is done with the help of comparison between Uber and the normal cab services. Uber uses the concept of sharing economy while the normal cab services still operate in normal traditional business model.

Uber 

Uber is now among the fully established brands in the cab services segment in Australia. It has developed significant opposition from the offline taxi system due to its application based transportation module. Initially, there was a huge fuss about UberX’s legitimacy, through which travellers could share their rides by connecting to a private driver via the application. But apparently, it has been noticed that the ride-sharing concept of UberX is proved to be functioning absolutely right in most of the states and areas. It implements the ride mainly through the Uber Application which can be accessed in mobiles, connecting the driver going in the desired direction and the passenger willing to board a cab. Either a person can book a cab by the application or use the more sophisticated version known as UberBlack. In this type, a customer’s know where is located by the GPS and is connected to the driver who is closer than others. The cab’s location and the path are tracked by GPS and whether the driver is willing to move in the traveller’s direction are sent to the traveller through the Uber application. You can install this application free of cost. While booking the customer should select the mode of payment before boarding the cab. If the traveller wants to cancel, then he has to do so within five minutes of booking the cab else a cancellation fee is charged. A part of the driver’s charge of about 20-27.5% is transferred to the Uber account. ( Maddocks-Bronwyn 2017).

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Cabs mode of operation 

Employed under these cab or taxi companies, the drivers are self-dependent employers who usually give payment from their earnings or deliver an amount to these organizations as rent for the taxis. The taxis can be booked in a number of ways as on the web, through telephones, commanded off on the roads or by booking through the applications. The payments are maintained via either money, Mastercard or charges collected within the cab.

Differences 

The basic difference between the two types is that a normal cab could confirm their clients either by driving them to the required destination and charging an amount via meter or simply they do not agree to serve the reason could be anything. In the application format, all the aspects of charging and location feed are done by the App. Additionally, the ride-sharing event adds up to it and it depends on the traveller whether to accept or not.

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Tax obligation 

In the case, Uber BV v Commissioner of Taxation (2017, a High court judge agreed that Uber also comes under the purview of tax norms designed for taxi services. Since the cab drivers were providing services to the general population, they come under the purview of tax collection. It was established that the reference of the transaction amount or the taxi meter is not as crucial as the fact that these people are liable for tax assessment. 

 The chief’s contention was that the Uber taxi despite the fact that a ride imparting stage to no tenets as the ordinary cabs, were still vehicles. These were employed to transport individuals to goal for an expense and subsequently, they were obligated to tax collection. The reference to the taximeter or a reference to the sum made on the ride or every day is not critical in assurance whether they are liable to tax assessment. The magistrate used the word reference approach in attempting to influence the court on what the suggestions were relating to the operation of a taxi. This dispute over the long haul affected the court in connection with this conflict the taxi is just a contracted vehicle free of the convolutions on the strategies for instalments (Australia tax guide 2010).

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The judgment is to be given as per the statutory clause of the premises before coming to a stand. The court is comprehending the main challenge as the difficulty in delivering the amount in the name of GST and yet the collections are not officially registered. Thereby the court has commanded that the taxi drivers ought to collect the tax as they fall under the Act of the GST which is significant. For example, in the case of Mr Fine, the subject was using an auto which was surely not a case of overspending or lavishness as per the Act. But on the other hand, it was being used as a taxi. Therefore, the legal authority had to adhere forcefully. Moreover, the court further did not accept the application along with the costs. (Australia tax guide 2010).

The provisions of the GST Act recognize the Taxi operations and the court noted that the same is not different from Uber in terms of taxation obligations. 

The court has acknowledged the fact that Uber also falls under the purview of taxi laws prevailed in the country just like any other taxi service and they also have similar tax liabilities. It can be concluded from the case that since Uber fits into the definition of the taxi, they should abide by the laws which are imposed on other taxi companies (Ken 1999).

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Question 3

Some of the relevant recommendations include the below points:

The task force is providing significant importance to the individual identity by using biometry to find out whether by using this technology the problem of the black economy could be curbed or not. Whether by checking the security insurances, the cooperation to the black money can be nullified. In addition to this, the Taskforce is involved in studying the character framework of individuals and the formation of a ‘basic biometric marker’. It is depicted as a confirmation of an individual’s identity. All of these points are being mentioned in the counsel paper. There is a strong recommendation of the utilization of biometrics while installing the cards for the non-governmental field and in addition to this, it can be used to generate individual identifiers of a non-biometric type.

The use of individual identity and biometry- in this, the interval report expresses that the Taskforce plans to look all the more carefully in the last report at ‘whether expanded utilization of biometrics (subject to security insurances) would help to decrease black economy cooperation, alongside a more extensive take a gander at the issue of advanced characters which some underlying discussions have noted ought to be viewed as.’ The counsel paper additionally expresses that the Taskforce is occupied with sees on a national individual character framework, demonstrating that a ‘basic biometric marker is a conceivable arrangement’ to confirming people’s identities. The paper likewise recommends that the non-government field, biometrics could be utilized on instalment cards or non-biometric individual identifiers may be produced. The biometric information will be used with the ultimate objective of the automatic biometric checks. Also, the biometric unmistakable confirmation is seen as fragile information under the Privacy Act. Delicate information is the most important thing considered and dealt with a more hoisted measure of affirmation under the APPs than other individual information. For example, APP substances may simply assemble fragile information around a man with consent and for purposes that are sensibly vital for or particularly related to that component’s abilities unless an exception applies (interim report 2007). The concern of expanded groups will increase with the treatment of biometric data.

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It is recommended to use data analysis and technologies related to information technologies. The time report shows the role of developing expository in overcoming the black economy. Break reports, investigation reports, etc can be helpful with regards to the black economy. The security standards can be questioned by information standards. OAIC draft demonstrates the scope of potential damage with regards to the Australian Privacy principle and large information. Modernisation of the data matching program is also expected. 

The other is Data matching. In this, The between time report pointed out that the Taskforce expects to look all the more carefully in the previous report at the determination in building up a committed black economy system for facts accumulation, utilize and investigation. This pitch observes the present occupations points of interest supplementing by government workplaces and requires the augmentation and modernization of these coordinating projects. Since noted over, the OAIC has an authoritative commitment in regards to data organizing, including under the Information planning Project (Help and Expense) Act 1990 (Cth) (where data coordinating incorporates impose archive numbers) and under the Individual security Act and the OAIC‘s purposeful Rules on Information Coordinating in Australian Central government Organization for data supplementing that does exclude assess record numbers. 

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It can be further recommended that proposals should incorporate those of widening the taxable payable reporting system (TPRS) to two high-risk ventures – cleaning and detachments – to ensure portions made to transitory labourers in these divisions are represented to the ATO. The TPRS has formally improved tax consistency in the building and infrastructure industry. Precluding the make, assignment, possession, use or offer of offers covering advancement. This development empowers associations to minimize their pay and has been perceived as a hazard to the trustworthiness of the tax system both in Australia and internationally  (interval report 2017).

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Numerous suggestions have been given to the governing authority to make sure that the end goal is to guarantee that the dark economy and sharing economy don’t have extraordinary and dependable impacts on the economy. It should simply be trusted that a portion of the suggestions in this will be withstood to keeping in mind the end goal to forestall impose shirking and additionally avoidance by guilty parties who take part in some of these demonstrations.

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