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Is the Government withholding last pieces of the tax reform puzzle?

Publication date: 21 Sep 99 | Source: THE TAX INSTITUTE

Whilst the Government is to be commended on its overall response to the Review of Business Taxation's report, "A Tax System Redesigned", the Taxation Institute is concerned that the Government is silent on a number of matters critical to the ultimate success of its tax reform process.According to Taxation Institute of Australia President, Mr Gordon Cooper, the Government needs to advise of its position on two key initiatives in the Review of Business Taxation's report which are both fundamental to the progress of the Government's reform of our tax regime.

"The Government has yet to indicate specifically whether and how it will adopt the recommendation on progressing the Integrated Tax Code. This Code is a central feature of the Government's tax reform process, based on administrative reform bringing together business tax policy and legislation," Mr Cooper said.

"This is closely linked with the proposal in "A Tax System Redesigned" for a Charter of Business Taxation which is intended to establish a framework for the development and ongoing maintenance of laws affecting business."

The Institute is also concerned with the Government's lack of response to reforms proposed in "A Tax System Redesigned" relating to the international tax arena and the taxation of financial arrangements, including leases.

"The Government has indicated its desire to make Australia more comparable with its major trading partners in the tax treatment of international transactions. However, the only Government response so far is to indicate that consideration will be given to allowing imputation credits for withholding tax on foreign dividends. International comparability requires more than this," Mr Cooper said.

"In addition, the Governments position on the taxation of financial instruments has remained unresolved for several years. It is time for the Government to bite the bullet on this issue and resolve this matter in the interests of certainty for affected businesses and transactions."

"If the Government is interested in reinforcing the integrity of the tax system, it will need to address more than the taxation of lease assignments. For example, clarification is needed on the treatment of leases and rights over non-depreciable assets."

"The Government's tax reform strategies are at risk of faltering the longer these issues remain unresolved," he said.