In December 2016 the Minister for Small Business, the Hon Michael McCormack MP, invited submissions for the 2017-18 Federal Budget.
The president of The Tax Institute, Matthew Pawson, has made a submission to the Treasury’s budget policy division head Matthew Flavel, saying that the 2017-18 Budget should “address complexity in the tax system to ensure Australia has a tax system that can simply, fairly and efficiently support the Budget objectives.”
Mr Pawson said that a “comprehensive overhaul” is needed to ensure the tax system of the future stimulates productivity and economic growth.
“To achieve this, complexity and impediments to growth need to be removed and a simpler, fairer and more efficient tax system needs to be designed,” the submission said.
“Taking a piecemeal approach to reviewing small segments of the system to address the complexities in those areas only contributes on a minor scale to remedying the system. As such, a holistic approach to addressing complexity in the tax system is required.”
Mr Pawson said there are a number of causes and drivers of complexity in the system, including unclear policy intent, uncertainty about interactions between different parts of the law, exceptions from the main rules, inclusion of integrity rules, and uncertainty around the application of general anti-avoidance rules.
Further, the level of guidance the ATO is required to issue after a law change is a strong indication of the complexity of the law according to Mr Pawson.
“The ATO’s willingness to provide guidance is welcome, but the abundance of guidance, including in both binding and non-binding forms, illustrates the fact that Australian tax law is not easily understood in the absence of guidance,” the submission said.
Mr Pawson suggests that the government should utilise the opportunity that the annual Federal Budget provides to address the issue of complexity by improving policy development, law design and the consultation process, and completing the rewrite of the Income Tax Assessment Act 1936 (Cth).
“The Tax Institute endorses the pursuit of a tax system with simpler and fairer taxes. We endorse both simplicity and fairness as objectives, though in practice a variety of ideas about ‘fairness’ exist, not all of which are easy to reconcile with simplicity,” the submission read.
“The Tax Institute also supports in principle the aspiration for ‘lower’ taxes but recognises the difficulty in achieving this in the short to medium term given the current budget deficit.”