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Compliance costs on tax reform agenda


The government’s tax discussion paper, released this morning, has called for a simplification of the tax system, declaring excessive resources are currently being devoted to tax compliance and tax management activities.

By Michael Masterman 9 minute read

The discussion paper is intended to begin a dialogue on tax reform and will lead to a white paper that will outline the tax policy the government will take to the next election.

Among a raft of recommendations, the discussion paper calls for the simplification of an overly complicated taxation system which, the paper says, is costing the economy through excessive administration and compliance costs.

“The Australian Taxation Office (ATO) estimates that total tax compliance costs are in the order of $40 billion per year. Around 72 per cent of Australian tax filers engaged a tax agent to assist them in meeting their tax obligations for the 2011/2012 income year," the paper said.

“These costs represent resources diverted from other more productive or enjoyable activities.

“Complexity acts as an additional drag on the Australian economy when the costs of taxation arrangements outweigh their intended benefits. Reducing unnecessary complexity would clearly provide benefits to the economy."

The government’s deregulation agenda seeks to address compliance costs directly by reducing the amount of regulation individuals and entities must comply with, including by simplifying particularly complicated areas of law such as taxation law.

“Minimising tax complexity requires a broad change in attitudes and practices, including community acceptance that, while a reduction in complexity is likely to deliver substantial benefits for taxpayers as a whole, solutions are also likely to entail costs for some,” the paper said.

Both CPA and CAANZ welcomed the release of the discussion paper and what it means for the wider tax reform process.

Michael Croker, head of tax Australia at CAANZ, said chartered accountants will work in the public interest in formulating its position and submit its thoughts on the paper in due course.

“Tax reform is about building a better, sustainable tax base which meets the future needs of Australia. We need to challenge existing thinking and develop new policies, even if the outcome isn’t popular with particular groups within our society,” Mr Croker said.

Alex Malley, CPA chief executive, said the discussion paper represents the start of a critical debate for Australia’s future prosperity

“If Australia is to be globally competitive, we need a revitalised tax mix that better positions our country to deal with the demographic, social, economic and environmental challenges of the 21st century,” Mr Malley said.

The discussion paper details 66 discussion questions on which the government has asked for feedback.

The paper can be accessed here.

Submissions and suggestions on the discussion paper can be made until 1 June 2015.

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