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Option 2 debate misleading, says TIA

Publication date: 10 Nov 99 | Source: THE TAX INSTITUTE

The Taxation Institute of Australia has strongly criticised the attempt by the Government and the bureaucracy to link the new radical tax calculation method 'the so-called Option 2' to anti-avoidance measures recently announced.

"Option 2 is a radical new method of calculating everyone's tax, including you and me, not just big business," said Taxation Institute of Australia Senior Vice President, Mr Ray Conwell.

"The Review of Business Taxation stated that Option 2 created a more consistent framework which will deliver greater integrity, simplicity and certainty. Combine this with the fact that the measures are meant to get the same result and are said to be revenue neutral, how can Option 2 be an anti-avoidance mechanism?" asked Mr Conwell.

"This is a desperate attempt by the proponents of Option 2 to stifle debate about its inherent problems and to tarnish those seeking to frankly and openly discuss these problems as supporters of tax avoidance."

"Option 2 is an unproven tax based on accretion in net wealth. No other country in the world has attempted to introduce it in its proposed form. It will impose major compliance costs on small and medium businesses as well as significant costs for big business. This complex income calculation method needs to be refined, otherwise the inherent uncertainty of this new tax law will result in it producing a host of unintended consequences. It will take a decade for the courts to develop clear principles of application."

"Rather than attempting to stifle discussion on a measure that changes the fundamental way all Australians calculate their taxable income, the Government should be consulting with small business and individuals to ensure that it is a fairer and simpler tax and actually reduces compliance costs. Instead, it has engaged in clandestine consultative discussions with the big end of town ignoring small and medium business and individuals," he said.

The Taxation Institute of Australia seeks urgent open consultation with Government on this issue.