Why would you tax vices with one policy hand and subsidize them with the other? Australia’s plan to exclude gambling and tobacco from research and development tax breaks helps align its subsidy policy with its public health goals and the rest of the tax code.
Australia is proposing to deny R&D tax offsets to companies involved in gambling and tobacco, except where that research is aimed solely at harm minimization. The ban would apply retroactively from July 2025, covering all gambling formats and all nicotine products, including newer offerings such as smokeless tobacco devices.
The reasoning seems clear: Public money shouldn’t be used to bankroll private harm.
Governments tax gambling and tobacco to raise revenue, but they also do so because of social costs—addiction, bankruptcies, and poor health outcomes. So it makes little policy (or administrative) sense for the same governments to hand out subsidies to the sin-taxed industries.
Australia’s proposal is coherent, not radical. Affected companies would still be free to innovate, but research on how to make slot machines more enticing or nicotine products more addictive would be funded by themselves. Taxpayer support would remain reserved for innovation that benefits the public—or at least doesn’t cause damage.
Understanding that the tax code is about incentive-shaping as much as it is about revenue raises the question: What are we rewarding, and what are we discouraging?
Governments can’t claim to fight addiction while also juicing its profitability. The bare minimum for a coherent tax code should be ensuring levies and subsidies aren’t canceling each other out.
—Andrew Leahey
Welcome to the Week in Insights for Bloomberg Tax’s latest analysis and news commentary. This week, experts analyzed AI in the tax preparation space, the economic substance doctrine, and more.
The Exchange —It’s where great ideas on tax and accounting intersect.
Insights
AI Will Never Replace a Human Tax Pro’s Judgment and Skepticism
A tax professional’s most valuable traits—doubt, skepticism, critical thinking, and judgment—are human qualities that AI can’t replicate.
Australia’s Transfer Pricing Scrutiny Calls for Litigation Prep
The more taxpayers prepare for Australian transfer pricing litigation when the stakes are high, the better their chances will be of reaching a non-litigious resolution by agreement.
The IRS Clock Keeps Ticking Despite Staff Shortages and Backlogs
As IRS operations continue to recover from the shutdown, taxpayers should stay vigilant to track any pending matters to protect against expiring deadlines and potential errors.
UK Budget Signals a Strategy, if Business Chooses to Engage
The UK Budget signaled a shift toward a more strategic, long-term approach to competitiveness—and an invitation for industry to help shape it.
Economic Substance Doctrine, Penalty Lie in Wait for Taxpayers
Taxpayers should be mindful of even the slim possibility that the IRS or US government will assert the economic substance doctrine and penalty.
Spanish Supreme Court Rulings on Wealth Tax Benefit Nonresidents
Two Spanish Supreme Court rulings represent a major step toward eliminating discriminatory wealth tax rules against nonresidents.
Big Business Doesn’t Deserve a Pass on the Corporate Minimum Tax
The corporate alternative minimum tax is at risk of stealth repeal as business interests lobby for “relief,” but the Treasury Department shouldn’t take the bait.
The UK’s Patent Box Supports Innovation When Business Acts Early
The UK’s generous Patent Box relief can strengthen cash flow and support continued innovation, if businesses are aware of it and act early.
Columnist Corner
Texas cities’ lawsuit over new sales tax sourcing rules issued by the state comptroller shows that municipalities and states should reduce revenue dependence on incentives designed to attract fulfillment centers, Andrew Leahey argues in his latest Technically Speaking column.
Investments in workforce development, technical training, and support for local manufacturers would be better ways to build long-term economic value, Andrew says, adding that in Texas, “now that the rules have changed, so should the strategy.” Read More
News Roundup
House Tax Writer Seeks August Enactment of Crypto Bill
A key House Republican hopes to quickly line up a Democratic co-lead in an effort to enact legislation changing the tax treatment of cryptocurrency by next summer.
Estonia Mulls Minimum-Tax Support Following EU Concession
Estonia will decide whether to drop its opposition to a renegotiated minimum tax agreement after the European Commission promised to assess whether the Baltic country can extend its exemption from applying the law beyond 2030.
Companies, Workers Gauge Reporting on Tax Law’s Overtime Break
Companies are weighing how much help to give employees to calculate the new overtime deduction in the upcoming tax-filing season.
Illinois Settles Tax Suits, But Constitutional Questions Linger
Several Illinois Tax Tribunal complaints from online retailers challenging unpaid liabilities were resolved under the state’s recent tax amnesty, but the larger constitutional questions raised by the litigation remain unanswered.
Tax Management International Journal
How Canada’s Budget Law Affects Canada-US Tax Comparisons
How Canada ‘s November 4 federal budget affects Canada-US tax comparisons is examined.
Career Moves
Holland & Knight Adds Partner to Private Wealth Services Group
Dara Lynn Freytag joined Holland & Knight as a partner in its private wealth services group in Boston, the firm announced Monday.
Thrings Adds Neusinger as Succession and Tax Partner in Bath
Harriet Neusinger joined Thrings as a partner in its succession and tax team in Bath, the firm announced Monday.
Centri Consulting Adds BDO’s Petillo as Tax Advisory Leader
Rich Petillo joined Centri as partner and tax advisory practice leader, the firm announced Monday.
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