Table of Contents
Double Taxation is the levying of tax by two or more jurisdictions on the same declared income (in the case of income taxes), asset (in the case of capital taxes), or financial transactions (in the case of sales taxes)2)
While an aim of the Australian-U.S. Tax Treaty is to avoid double taxation, there is no exemption or refutation in the treaty of the U.S. claim of tax jurisdiction over Australia. Nor is there refutation of the U.S. claim that Australian residents are also “residents” of the U.S.
In the case of Australian tax residents, who are also U.S. Persons, there is further tax and penalties required by the overlay of the 76,000+ page U.S. tax code on top of the Australian tax rules. This is beyond all tax and compliance required by Australia. While the treaty helps mitigate double taxation extra tax is guaranteed from the mismatch of the two tax codes.
‘Under a specific set of circumstances Australian residents who are also U.S. Persons may be subject to United States taxation on their Australian-source income and assets. These circumstances are called Tax Treaty Gaps.’ 3)
Why Does Double Taxation Represent Injustice?
“Immanuel Kant said taxation was justified when it increased human autonomy by providing for people’s basic survival needs or for the protection of property rights.”4)
The Australian Government is justified to tax Australian residents. The U.S. Government is not justified in its claim of tax jurisdiction over Australia. The U.S. Government does not provide services for Australian residents (roads, hospitals, education, unemployment payments, etc), nor does the U.S. Government provide for the protection of property rights within Australia.
The Australian Government ratified a tax treaty with inadequate protection of property. There is also no protection against loss of autonomy from the complexity, U.S. penalties, and compliance burden of the overlay of the U.S. Tax code on top of the Australian tax laws.
There is no evidence in the treaty text that the Australian government did any more than to accept the text from the United States. U.S. tax obligations representing double taxation flow through and become obligations under Australian law as represented by the tax treaty and FATCA IGA.
The Tax Treaty incorporates tax injustice and, consequently, is flawed. The Australian Government has a sovereign right and obligation to prioritise modification of the treaty to comprehensively protect Australians from the unjustified extraterritorial U.S. tax and compliance.
⇒ clear documented examples of double taxation required