Barkoczy, Stephen --- "Editorial" [1998] JlATax 7; (1998) 1(2) Journal of Australian Taxation 81

Editorial

Associate Professor Stephen Barkoczy

Given the breadth and diversity of the various taxes imposed in this country, it is not surprising that acronyms have crept their way into our fiscal language. We are all familiar with terms such as CGT, FBT, FIF, CFC, BAD, and SGC that are used to express distinct taxation concepts. If a GST is introduced in Australia, this will only add another layer to the matrix of acronyms that we commonly use. In the light of our present government's GST proposal, it is interesting to read Adrian Sawyer's article in this issue of the Journal which discusses the New Zealand proposal for a financial transactions tax ("FTT") to possibly replace that country's GST. Taxation acronyms and tax reform are obviously not just matters that concern Australia.

Law reform cannot be viewed in isolation and is not limited to the taxation arena. Corporate law is another major area which is experiencing reforms. The relentless pace of change in the tax arena has been exacerbated by these changes. The Company Law Review Act 1998 has fundamentally amended the Corporations Law and has necessitated consequential income tax changes. The corporate law amendments have resulted in the abolition of par value for shares and the associated concept of share premiums. Under the new Corporations Law, companies will now need only be concerned with a generic "share capital account" instead of both paid up capital and share premium accounts. To ensure that provisions in the tax laws operate consistently with the new Corporations Law regime, the Taxation Laws Amendment (Company Law Review) Act 1998 has made a number of changes to the taxation laws. Of general importance are the consequential amendments made to the definition of dividend in s 6 of the Income Tax Assessment Act 1936 ("ITAA36").

Under the new Corporations Law rules, it is easier for companies to return capital to shareholders. It was feared that, without an appropriate taxation response, this could result in significant revenue loss or deferral because of the greater ease with which companies could stream capital returns to shareholders. Anti-avoidance measures have therefore been introduced to prevent dividend substitution and dividend streaming. These new rules are contained in the new ss 45(1), 45A and 45B of the ITAA36 which are closely examined by Paul Abbey in his article in this issue of the Journal. Paul Abbey also examines the operation of new Div 7B of Part IIIAA of the ITAA36 which contains special "tainting" rules. These rules are designed to address the concern associated with retained profits being transferred to a company's share capital account and distributed on a tax preferred basis. Under the new rules, distributions from a share capital account which is "tainted" will be treated as unfrankable and non-rebateable dividends.

Aspects of tax reform are also considered in Kerrie Sadiq's article dealing with the viability of Australia as an offshore banking centre. The article examines Australia's offshore banking unit regime and compares it with the Singapore and Hong Kong regimes. Comparative international tax issues are also considered in Tan How Teck's article on the concept of "permanent establishment" in Australian tax laws and treaties.

In the final of the five articles appearing in this issue of the Journal, Justin Dabner examines the theory of income in the context of cases involving lease incentives. In undertaking this analysis, the author contrasts the jurisprudential and economic approaches to identifying income. The article highlights that in spite of the myriad of taxation issues that concern practitioners and academics nowadays, the fundamental issue of what constitutes income is still as important as ever.

September1998