Development Of The Oil Companies Taxation -Myassignmenthelp.Com

Question: Discuss About The Development Of The Oil Companies Taxation? Answer: Introducation From the latest Annual Report of Cromwell Property Group, it can be observed that there are four major items of equity in the consolidated balance sheet of the company; they are Contributed Equity, Other Reserves, Retained Earnings/ (Accumulated Losses) and Non-controlling interests (cromwellpropertygroup.com 2018). Contributed Equity refers to the summary of the total stock value of the companies that the shareholders have directly purchased (Finkler et al. 2016). Increase in contributed equity can be seen in 2017 than 2016. For the company, it has increased from $106.5 million to $106.9 million; and for trust, it was from $1287.5 million to $1295.2 million. The main reason behind this increase in the increase in the number of share issued in 2017; that is 1,762,361,339 from 1,752,331,208 (cromwellpropertygroup.com 2018). Reserves refer to the amount excess money shareholders pay except the par value of shares (Daskalakis, Jarvis and Schizas 2013). In 2017, increase in reserves can be seen in Cromwell Property Group for both the company and the trust. For the company, it has increased from $17.9 million to $18.2 million; and for trust, it was from $2.3 million to $1.7 million (cromwellpropertygroup.com 2018). The main reason in the increase in reserve is the presence of various reserve heads; they are security-based payments reserve, sales reserve and reserve for foreign currency transactions. Retained Earnings and Accumulated Losses refer to the total profit and loss of the companies due to the payment of dividends (Bourguignon, Branson and De Melo 2015). In 2017, there is accumulated loss for the company; that is $112.9 million in 2017 and $129.4 million in 2016. For trust, there is retained earnings; that is $ 292.3 million in 2017 and $178.0 million in 2016. Non-controlling interest refers to the portion of equity ownership not attributed to the parent company. For trust, increase in non-controlling interest can be seen; that is $1627.7 million in 2017 and $1505.2 million in 2016 (cromwellpropertygroup.com 2018). Business organizations are required to incur different types of expenses for smooth running of the business operations. One such expense is Tax Expenses that the companies are required to incur, as they own this expenditure to the federal government and state government (Khafizova and Fassakhov 2015). There is no exception of this fact in case of Cromwell Property Group as the company is needed to pay their tax expenses for yearly basis. The annual report of Cromwell Property Group shows that the applicable tax rate of the company in 2017 and 2016 was 30% as per the Australias company tax rate. The analysis of the latest annual report states that the company has tax expenditure worth $1.5 million in 2017 and $3.5 million in 2016 for the company. For trust, the amount of income tax expenditure in 2017 is $0.3 million (cromwellpropertygroup.com 2018). It needs to be mentioned that Cromwell Property Group has divided the tax expenses in three parts; they are current tax expenses, deferr ed tax expenses and adjustment in tax expenses for previous taxation period. The analysis of annual report of Cromwell Property Group states that the company has $278.7 million and $333.1 million profit before income tax in 2017 and 2016 respectively for the company; and $261.1 million and $371.4 million in 2016 for the trust. Thus, in 30% tax rate, the income tax expenses should be $83.6 million ($287.7 million*30%), $99.3 million ($333.1 million*30%), $78.3 million ($261.1 million*30%) and $111.4 million ($371.4 million*30%). However, the reported tax expenditure of the company is $1.5 million in 2017 and $3.5 million in 2016 for the company. For trust, the amount of income tax expenditure in 2017 is $0.3 million (cromwellpropertygroup.com 2018). Thus, it can be seen that there is clear difference and some specific factors are responsible for this difference. It can be seen that the companies use to do some taxation adjustments after the payment of annual tax and all these aspects are needed to take into consideration. The first item is the income of trusts . In 2017 and 2016, the trust of Cromwell Property Group has acquired a number of corporate entities that is subject to tax deduction. The next item is fair value impairment. It is an expenditure that is subject to tax deduction and thus it has been adjusted in 2017. In the business operations, Cromwell Property Group has some expenses that are not subject to tax deduction and thus, they have been adjusted with the taxation expenses for the company in 2017 and 2016 (Weber 2014). The next important item is change in recognized tax losses. It is an important aspect that needs to be adjusted with the taxation expenditure. Thus, the company has adjusted this amount in 2017 for the company. It was required for the company to adjust the taxation expenses related to the previous years and thus, they have been adjusted with the tax expenditure in 2017 and 2016 for the company. In addition, difference is there due to the difference in overhead tax rate. All these aspects have created the dif ference (Figari et al. 2012). The annual report of Cromwell Property Group states that the company has reported both deferred tax assets and deferred tax liabilities in their consolidated balance sheet. Cromwell Property Group reported $3.4 million in 2017 and $1.3 million for company; and $0.3 million in 2017 for the trust as deferred tax assets (cromwellpropertygroup.com 2018). The company has also reported $0.9 million in 2017 and $1.9 million for company as deferred tax assets. There is not any deferred tax liabilities for the trust. According to the adopted policies, the company reports about deferred tax assets and deferred tax liabilities in the presence of temporary difference in the tax rate at the time of the recovery of assets and settlement of liabilities (Laux 2013). In Cromwell Property Group, the major factors responsible for deferred tax assets are interests in managed investment scheme, employee benefits, and transaction costs, recognition of tax losses and loss or gain from unrealized foreign cu rrency. The only factor responsible for deferred tax liabilities is management rights related to intangible assets. All these factors are responsible for deferred tax assets and liabilities. The latest annual report of Cromwell Property Group states that the company has recorded both current tax assets and income tax payable or current tax liabilities in their consolidated balance sheet. Cromwell Property Group recorded $1.2 million and $1.7 million as current tax assets in 2017 and 2016 respectively. Cromwell Property Group has also recorded $1.7 million and $2.2 million as current tax liability in 2017 and 2016 for the company; and $0.5 million for the trust (cromwellpropertygroup.com 2018). It needs to be mentioned that there are some major differences between income tax payable and income tax expenses. Income tax expenses refers to the tax expenses for the current financial year of the companies that is required to be paid in the current year (Gogol 2016). However, income tax payable can include the tax due in the previous year. There are many instances where it can be seen that the companies pay less amount of tax due to temporary difference in tax rate. For this reason, companies are required to pay the due tax in the next year and thus, they are appeared as income tax payable (Friedman 2013). The analysis of the latest annual report of Cromwell Property Group shows that the company has reported different amount for income tax expenses in income statement and cash flow statement. As per the consolidated income statement, the reported income tax expenses are $1.5 million in 2017 and $3.5 million in 2016 for the company; and $0.3 million in 2017 for the trust. As per the consolidated statement of cash flows, the reported income tax payment are $4.6 million in 2017 and $3.5 million in 2016 for the company; and $0.1 million in 2017 for the trust (cromwellpropertygroup.com 2018). Thus, difference can be spotted in the recorded tax expenses. Income tax expenses in the income statement shows the amount of income tax needs to be paid for the current financial year (Widerquist et al. 2013). However, cash flow from operating expenses considers the decrease and increase in current assets and liabilities. At the same time, payment for differed tax expenses and income tax payable are t he part of the current liabilities of the companies. For this reason, the income tax payment in statement of cash flows includes the payment of previous year tax expenses and deferred tax expenses (Fodor 2015). For this reason, disparity can be seen in the income tax expenses in income statement and cash flow statement. The above analysis shows that Cromwell Property Group has done their different income tax treatments in an effective manner as the company has provided all the required justification and clarification about their taxation treatment in the financial statements. For this reason, one can get effective insight about how big organizations do their tax treatments. Most importantly, one will be able to understand the major reasons responsible for creating disparity in the amounts of tax payment in different areas of financial statements. References Bourguignon, F., Branson, W.H. and De Melo, J., 2015. Adjustment and income distribution: A micro-macro model for counterfactual analysis. InModeling Developing Countries' Policies in General Equilibrium(pp. 117-139). Cromwellpropertygroup.com. (2018).ANNUAL REPORT 2017. [online] Available at: https://www.cromwellpropertygroup.com/__data/assets/pdf_file/0015/22920/CMW-2017-Annual-Report-final-web.pdf [Accessed 23 Jan. 2018]. Daskalakis, N., Jarvis, R. and Schizas, E., 2013. Financing practices and preferences for micro and small firms.Journal of Small Business and Enterprise Development,20(1), pp.80-101. Figari, F., Paulus, A., Sutherland, H., Tsakloglou, P., Verbist, G. and Zantomio, F., 2012. 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