The debt levy, paid parental leave scheme levy and the idea of allowing states to levy income tax are examples of measures that would have a significant impact on the incentive for taxpayers to avoid their tax obligations, the firm has claimed.
Greg Travers, tax director at William Buck, said that while, by world standards, Australians are relatively good at complying with their tax requirements, any policies leading to high compliance costs, complexity or perceived inequity in the tax system would serve to encourage higher levels of tax avoidance.
The debt levy and the paid parental leave scheme levy will increase the discrepancy between the corporate tax rate and the highest marginal tax rate for individuals, according to Mr Travers.
“The differential is 19.5 per cent, up from the current 16.5 per cent. People perceive this arbitrage as inequitable. The differential is significant and I expect we will see taxpayers trying to take advantage of it – legitimately and illegitimately,” he said.
“In our experience, the more complex a tax system is, the greater the opportunity and incentive for tax avoidance. Higher levels of avoidance inevitably lead to more integrity measures in the tax laws which in turn add to compliance costs and shift a greater portion of the tax burden to those taxpayers who are trying to comply with the law,” he added.
Mr Travers also said that passing the right to levy income tax back to the states, as suggested in the Commission of Audit report, will only complicate matters.
“Even the most cursory consideration of existing tax systems shows that such an approach would add further complexity to the tax system. This again increases opportunities and incentives for tax avoidance,” he said.
“The last thing Australia needs to do is create, within our own borders, complex and inefficient tax arrangements that add more compliance cost burdens on businesses. This only further increases the opportunities and incentives for tax avoidance".
“Some of the proposed measures are a direct response to revenue pressures in the budget, but if the measures also result in greater tax avoidance, this will only add to the existing revenue pressures. That is not the route we want to see the government go down,” Mr Travers said.