The taxation priority in insolvency: an Australian perspective

✍ Scribed by John Duns; John Glover

• Publisher: John Wiley and Sons
• Year: 2005
• Tongue: English
• Weight: 170 KB
• Volume: 14
• Category: Article
• ISSN: 1180-0518
• DOI: 10.1002/iir.130

✦ Synopsis

Tax claims are the most common precipitant of a bankruptcy or winding up and they appear to be claiming an increasing proportion of the insolvent estate. 2 How tax claims should be treated in insolvency is accordingly an important issue. 3 Many jurisdictions have traditionally conferred a priority on tax claims. That is, in bankruptcy or winding up such claims are paid ahead of other unsecured, and in some cases also secured, claims. The form and scope of such a priority varies. In the United States, for example, priority is given to a variety of tax claims, including income tax. 4 In the case of the US, the priority is further bolstered both by statutory liens in favour of tax claims 5 and a denial of release, upon discharge from bankruptcy, from liability for such claims. 6 A more limited priority, which con¢nes a priority to claims for taxes that the debtor has failed to remit to the Tax O⁄ce, is also common. This, as will be seen, was the position in Australia until 1993. It was also the approach taken until recently in England and remains the case in Canada. 7