university of sydney

faculty of law

 

master of laws

master of taxation

master of international taxation

 

 

Comparative international taxation

take-home examination

 

 

INSTRUCTIONS:

1. This examination is a take-home examination. The examination paper will be made available at 9.30am Friday October 6, 2000 and answers must be submitted by 9.30am Tuesday October 10, 2000. Answers are to be submitted to Ms Bridget Nguyen-Ngoc (fax: 93510290; e-mail: bridget@law.usyd.edu.au; or leave at the enquiry counter on level 12 marked to Bridget’s attention).

2. The examination has a maximum word length of 6,000 words (i.e., 20 A4 pages).

3. Candidates must answer ALL questions. Each question is of equal marks. There is internal choice in Questions 2 and 3.

4. The examination is worth 70% of the marks for the course.

5. In each answer, state the further information (if any) that you may need to fully answer the question. Where necessary, state any assumptions that you have made in answering a question.

This examination paper consists of 4 pages, including this cover page. Please be sure that your examination paper is complete.

question one

News Information Corp, a company resident in Utopia, is engaged in the business of gathering and publishing news and analytical articles concerning business developments in Utopia. News Information is interested in selling and disseminating similar materials to persons in Republica. It is concerned about the expense and risk involved in establishing a print product for distribution in Republica so, at this stage, it is considering disseminating news and analytical articles over the internet. It seeks your advice on the possible Utopia and Republica income tax consequences of the following –

(1) Supplying news and analytical articles to international business news web sites in Republica operated by unrelated persons. News Information will be paid either a flat annual fee or a fee for each item accepted by the operator of the web site.

(2) Licensing the (unrelated) operator of an international business news web site in Republica to use news items or analytical articles prepared by News Information for its Utopia publications. The licence may be either an exclusive or non-exclusive licence.

(3) Establishing its own web site aimed at the Republica market that would seek subscribers in Republica for an annual subscription fee and would accept paid advertising from third parties.

In your answer, advise News Information on the basis that there is no tax treaty between the two countries and that there is a tax treaty that follows the OECD model treaty. Would it make any difference if the treaty followed the UN Model?

question two (answer one part only)

1. The Equitable Republic currently taxes only on a territorial basis. The Government has decided to tax residents on worldwide income, but is unsure as to the appropriate form of relief to prevent international double taxation. Advise the Government on the options for providing such relief. In your answer, outline the main design features of each method of relief.

 

OR

 

2. What is the purpose of anti-deferral rules? Outline the main design features of such rules and explain how those features relate to achieving the purpose of the rules.

 

OR

 

3. "Globalisation, changing international economic conditions and technological development, especially with regard to telecommunications, change the conditions for collecting taxes. Old and established theories and principles of taxation have to be re-evaluated in light of these changes."

Professor Sven-Olof Lodin

President of the International Fiscal Association

Discuss.

 

Question Three (answer two parts only)

1. P Corporation has its main office in Republica and a permanent establishment in Utopia. Goods are manufactured at the main office in Republica and transferred to the permanent establishment for sale in Utopia. The cost of manufacture in Republica is $10. The goods are sold in Utopia to unrelated customers for $20. The main office incurs interest, research and development, and general management expenses for the company as a whole.

Advise P Corporation on the possible income tax implications of these facts.

2. A is resident in Republica. She is a partner in a partnership formed in Utopia. A lends funds to the partnership. The partnership pays A interest on the loan at market rates.

Advise A on the possible income tax implications of these facts.

3. What is the purpose of a branch profits tax? Outline the main design features of such tax.

 

 

 

 

 

 

 

 

End of Exam