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The impact of income tax complexity on practitioners in Australia


The Australian income tax system is based on self-assessment and is undoubtedly complex. In terms of meeting their income tax compliance obligations, Australians are heavily dependent on tax agents, more so than taxpayers in any other country in the world. This is mainly due to the fact that most Australian income taxpayers want an accurate return and that they think that the system is too complex for them to ever understand, or just not worth their while spending the time to do so. It follows that the burden of (or opportunity provided by) tax complexity falls on tax agents who are at the coalface in advising their clients. What are the causes of complexity for tax agents? What is the relative importance of these causes? How do they impact on tax agents’ practices? How has this changed over time? From the perspective of tax agents, is there a need to reduce income tax complexity, and if so, how can it be achieved?

These questions are addressed by a multi-paradigm research design using an electronic survey of tax agents and a case study. Briefly, the findings of the research are that agents are overwhelmed by the volume of tax material of which they need to keep abreast, not just legislation, but rulings determinations and practice statements issued by the Australian Taxation Office (ATO). To a lesser extent, the rate of change is an issue as is the complexity of the law. Agents’ job satisfaction is suffering as is their confidence in their technical ability. They are coping in a variety of ways including by undertaking additional technical research without always passing on the costs to clients; by narrowing the scope of their activities, or by relying on the advice of technical experts (which has implications for compliance costs). Tax agents feel frustrated with government and the ATO. There is a need for more simple, integrated and efficient tax systems with less regulatory material and less ad hoc change – and agents want to have more input into the process.

Author profile

Prof Margaret McKerchar
Margaret is a Professor Australian School of Business, School of Taxation and Business Law, The University of New South Wales. - Current at 01 May 2014
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