Tax Expenditures Efficiency Of Government -Myassignemnthelp.Com

Question: Discuss About The Tax Expenditures Efficiency Of Government? Answer: Introducation The financial statements help in getting a better view of the position of the companies with respect to finances that is represented in the balance sheet. The owners equity, liabilities and assets is considered to be the primary items that come in the balance sheet of the company. The current annual report of Energy Resources Australia Ltd. shows the major items under the heading of Equity, which consists of Reserves, Retained Earning and Issued Capital (Cohen-Cole Martinez-Garcia, 2013). The annual report of the company shows the amount of issued capital that has remained the same that is $ 706 million in both the financial years. The primary purpose of the equity shares is to fulfill the requirement of capital within the company. it can be seen that the earning per share of the company had decreased from $53.2 that was in 2015 to 52.4 in 2016 ("2016 Annual Report - Energy Resources of Australia", 2018). The other item that is present in the equity of the company is reserves. Reser ves are considered to be the excess amount that is paid by the shareholders apart from the nominal price of the shares. The equity reserve for the company in 2015 was $ 389 million, which decreased to $ 389 million in the year 2016. The company does not have any other reserve under that head in the year 2016. The last item under the head equity for the company is the accumulated loss, which showed an amount of $ (626 million) in the year 2015 that increased to ($ 897million) in the year 2016. When the business carries out its operations, the companies have to incur various expenses such as operating expenses, administrative expenses, selling expenses and others. The tax expenses are usually one of the items that the companies have to incur for the smooth operation of the business. The tax expenses can be formulated by multiplying the tax of the business with the income that the company had before the tax was paid after the reconciliation of the tax has been done (Burman Phaup, 2012). It is necessary for Energy Resources Australia to calculate their taxes in a correct way so that it can be paid accordingly on an annual basis. With respect to this, the company has to pay the tax expenses to the state and the federal government as well. The Australian Taxation Law issued 30 percent of tax for the companies that are doing business in Australia. The expenses related to income tax for the company in 2015 was $ 195 million and the annual report do not show any record for the in come tax expense of the company for the year 2016 ("2016 Annual Report - Energy Resources of Australia", 2018). The current annual report of Energy Resources Ltd. shows the profit before tax for the company as $ 79 million in the year 2015 and $ 271 million in the year 2016. The company follows 30 percent rate of tax in both the years. Thus, the expenses of tax for the company have to be ($ 79 million * 30%) that is $ 23.7 million for the year 2015 and ($ 271 million * 30%) that is $ 81 million in the year 2016. Nevertheless, as per the income statement of the company, the amount of expense that was considered as tax was $ 195 million in the year 2015 where in the year 2016 the company did not record any of it ("2016 Annual Report - Energy Resources of Australia", 2018). Therefore there has been a difference in the amount of tax that was paid by the company. This can be due to various factors, which may result in showing the difference between the income taxes of the company. The first reason is the difference between the rate of tax in the overseas market and the Australian market. The next r eason can be amortization and the non-deductible depreciation. The company had paid $1.1 million as depreciation and amortization in the year 2015 and $37 million in the year 2016, which has to be added back to the income tax expenses of the company for both the years respectively ("2016 Annual Report - Energy Resources of Australia", 2018). The deferred tax liabilities and assets are an important part in treating the taxes of the company. In most of the situations, the companies have to pay an extra amount as tax in the present year, which is known as the assets in the future years, which is known as the deferred assets of tax (Harrington, Smith Trippeer, 2012). In other situations, there are differences in the value of tax-carrying and the differences, which are known as deferred tax liabilities (Gallemore et al., 2012). The annual report of Energy Resources Australia shows the deferred tax liabilities to be $ 21.09 million in the year 2015 and $ 21.06 million in the year 2016. This shows that the company may face outflow of cash or losses in the future due to the decrease in the deferred liabilities for the company. The company can pay a lesser amount as tax in the year 2017, as they have already paid an amount in 2016. With respect to the treatment of taxes, the current tax assets and the liabilities need to be taken in to consideration, as it is considered to be important factors. The company did not mention any amount regarding the current tax assets and liabilities in the annual report. The company mentioned in the annual report that the current tax assets and liabilities are the offset of the entity that has the right to be enforced in a legal manner and its intention is to settle the matter in an overall manner or to sell the assets and help in the settlement of the liability simultaneously (Laux, 2013). Therefore, it can be stated that the differences in the income tax payable and expenses has to be mentioned by the company so that it can easily be calculated for the income of the current year (Dhaliwal et al., 2013). Thus it can be said that the income tax that is payable and the expenses for the company cannot be same. The companies mention the income tax expenses in the statement of income and in the cash flow statements as well, which has also been done by Energy Resources Australia. The company had an expense of $ 195 million as income tax in the year 2015 and in the year 2016 the company has not recorded the expenses. The company did not show any record of the income tax that they paid in the cash flow statement (Saad, 2014). This is mainly due to the fact that the flow of cash from the operating activities show an amount of outflow or inflow of cash, which may result in the decrease or increase in the assets or liabilities of the company. The tax that is payable comes under the head current liabilities for the company and the reconciliation in the cash flow statement is done later (Dowling, 2014). These are the probable two reasons, which create the differences in the income tax that is reported in the statement of cash flow and the statement of income for the company as well. Therefore the analysis that has been done above shows that Energy Resources Australia treats the taxes in a confusing manner, as the records are not properly maintained in the books of accounts ion an annual basis. The company has treated the taxes in an interesting manner, as the reconciliation of the tax has been recorded as notes, which are the primary causes for the differences in the amount of tax of the company. Additionally, the person can gain a better insight regarding the differences that are present between the expenses in the income tax that is recorded in the cash flow statement and the statement of income as well. They can also gain a deeper insight regarding the different rate of taxes that is prevalent in various countries and treat it accordingly. Reference List 2016 Annual Report - Energy Resources of Australia. (2018).Energyres.com.au. Retrieved 21 January 2018, from https://www.energyres.com.au/media/2016-annual-report/ Atkinson, A. B. (2013). 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The association between deferred tax assets and liabilities and future tax payments.The Accounting Review,88(4), 1357-1383. Marron, D. (2012). How Large Are Tax Expenditures? A 2012 Update.Tax Notes. Tax Policy Center. Saad, N. (2014). Tax knowledge, tax complexity and tax compliance: Taxpayers view.Procedia-Social and Behavioral Sciences,109, 1069-1075