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Government's announcement on anti-avoidance measures is reprehensible, says TIA

Publication date: 12 Nov 99 | Source: THE TAX INSTITUTE

The Taxation Institute of Australia has labelled the Government's announcement of its intention to substantially tighten the general anti-tax avoidance provisions of Part IVA as one of the worst examples of legislation by press release. According to Taxation Institute of Australia Senior Vice President, Mr Ray Conwell, although the changes are described as being "to improve the operation of the general anti-avoidance rule", the 'improvement' is solely in favour of the Tax Office.

"The most reprehensible feature of the announcement is that, notwithstanding its vagueness, the changes will apply retrospectively from 1.00pm on 11 November 1999," said Mr Conwell.

"Surely, this method of legislating would not fall into John Ralph's stated objective of creating a well functioning taxation system which must be seen to operate fairly, efficiently and transparently," he said.

The three changes proposed to Part IVA are an 'improved' reasonable hypothesis test, an expanded concept of tax benefit and ability for the Commissioner to issue a single determination.

"Changes to the reasonable hypothesis test are likely to involve removal of the 'do nothing' hypothesis, which commercially is often the reality, but which causes the Tax Office many practical difficulties in applying Part IVA," said Mr Conwell.

"Removal of this hypothesis would frequently mean the benchmark being the maximum tax payable: arguably a substantial 'improvement' in the eyes of the tax collector!"

"The expansion of the definition of 'tax benefit' will widen the Part IVA net, while the third proposed change appears designed to enable the Tax Office to make blanket determinations based upon general circumstances, rather than the specific facts of the case being considered," he said.