The Doctrine of Earnings Hardship Taxation

This doctoral study, “Comprehensive Anti Tax Haven Legislation for Australia and New Zealand: International Comparative Studies and Reform”, aims to illustrate, by way of case studies, a critical analysis of the appropriateness or the consequence of anti tax haven legislation in Australia and New Zealand that curbs such offshore tax avoidance schemes. Furthermore, similar legislation in the US, the UK, and some of the EU countries, is comparatively analyzed in order to develop recommendations for reform of the relevant anti tax haven measures in the Australian and New Zealand tax laws. This research also entails a study of some of the popular schemes that are adopted by residents for investing offshore using tax haven and low tax jurisdictions so as to avoid or defer taxes. In order to achieve these objectives, this study involved interviewing CFOs of large corporates and high net worth individuals to enquire as to how and why tax haven or low tax jurisdictions were being included in their offshore investment structures. It also involved interviews with tax authorities in Australia and New Zealand to enquire how they responded to tax havens activities by their tax residents.As part of my PhD research, I have interviewed two chairs of publicly-listed companies in Hong Kong and a tax barrister specializing in international tax planning and tax haven structures. They all agreed that tax haven activities could not be stopped and would continue to flourish despite all the international initiatives against them. They revealed their concerns over the inequitable taxing regimes on offshore income as compared to onshore income. Since tax haven abuse is an international problem, the effectiveness of the work of some international organizations in counteracting tax haven abuse of countries’ tax bases is also examined. The ultimate goal of this study is to contribute to reform that leads to a comprehensive review of anti tax haven legislation for Australia and New Zealand.This paper proposes a move away from the legal principle of “One Law for All”[1] in tax laws, with a new doctrine of Earning Hardship Taxation recommended to be introduced in domestic tax systems