Taxing Investment Income prescribes a simple, common sense framework for
income tax arrangements incorporating annual change in value of investment assets and liabilities that leave investment
decision-making unaffected.
That framework is used to underpin a simple and practical, yet principle-based, template for the redesign
of the lengthy, complex and opaque law that most countries have to tax the income of investments.
The design template deals with the three key facets of taxation of investment income:
the tax base, or taxable income – with ‘change in value’ replaced by ‘change in tax value’
specified by government for all investments like those in manufacturing activities, geared rental properties,
infrastructure, fruit orchards, annuities or indexed bonds;
taxation of entities, like companies and trusts and the people who invest in them and buy and sell their interests
in them – with taxable income of entities integrated with annual personal tax assessments of entity
investors regardless of the amount of income actually distributed (though in the presence of full imputation systems,
like those applying to companies in Australia, employed for practical reasons, including simple flow-through of foreign
tax credits); and
the international dimension – particularly the flowing of foreign tax credits through to local entity
investors with simple adjustment mechanisms able to address concerns over local tax collections.
Numerous tables and charts produced by the Kyscope show how the practical design template:
allows variation from politically-demanding features of the ‘pure’ framework with neutral impact
on investment decision-making; and
accommodates reforms by government that move the taxation of investment income closer to pure design.
Taxing Investment Income will be of particular benefit to analysts in tax offices, treasuries, ministers’
offices, accounting firms and business organisations, as well as tax academics and students, grappling with business
income taxation issues, like:
capital gains taxation, negative gearing of rental properties, taxation of infrastructure, management investment
schemes, and taxation of financial arrangements like indexed bonds and leasing;
the taxation of income of trusts and companies and their beneficiaries and shareholders, including
participants in off-market share buy-backs; and
the treatment at home of foreign taxes on offshore income.