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Attacks on trusts will not solve tax evasion problem, says TIA

Publication date: 24 Feb 98 | Source: THE TAX INSTITUTE

The sustained attack on trusts by the Treasurer and the Australian Taxation Office is unjustified and will not help solve the larger problem of tax evasion in this country, according to Taxation Institute of Australia President, Mr Richard Gelski.

"To suggest that trusts, in particular discretionary trusts have become a vehicle for 'widespread tax evasion' is patent nonsense," Mr Gelski said.

"Tax evasion occurs at the basic level of non-disclosure which is reflected in the black economy. The smoke screen that has been so admirably put in place by the Tax Office, and which has obviously influenced the Treasurer, is just that....a smoke screen," he said.

The Treasurer announced this week that the Government will review the taxation of trusts as part of its tax reform package rather than releasing a separate public discussion paper as promised in the 1997 Budget. The Taxation Institute is concerned that the review of trusts will now not be subject to public scrutiny by taxation professionals, but be conducted behind the closed doors of Government.

"If this Government truly intends to obliterate the family's use of trusts as a vehicle through which people may do business or hold assets, then it should conduct a full scale review of the grossly unfair treatment of company distributions to shareholders," Mr Gelski said.

"On the one hand, the Government provides for exemptions such as on the sale of goodwill in a business or, alternatively, exemptions in respect of the indexation component of profits on the sale of assets within the capital gains tax net, and on the other, it takes them away when they are passed through to shareholders in a company."

"The approach by the Tax Office, which seems to be blindly followed by Treasury, puts taxpayers into straight-jackets and forces them into unlimited liability as sole traders and partners in partnerships if they wish to take advantage of the 'goodies' such as those described above," Mr Gelski said.