Issue of shares and partnership interests, and the look-through approach within the scope of VAT and GST

Abstract

Taxpayers can raise money needed to provide taxable supplies by issuing shares. The issue of shares is a non-economic activity within the European VAT system and an input taxed supply within the Australian GST system. Both characterisations usually cause a denial of an input tax credit for acquisitions which are related to the issue of shares. In this paper, the author tests different mechanisms within the VAT/GST system which try to avoid unsatisfactory results caused by characterising the issue of shares as a non-taxable supply and ensure that only private consumption is subject to VAT/GST. The author will reveal that a general ‘lookthrough approach’ is the most appropriate mechanism because it harmonises the intended tax goal of the VAT/GST system and the concepts of non-economic, exempt and input taxed supplies.