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Proposed 'user pays' Rulings system has benefits, says Tax Institute

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

The Government’s proposal for the Tax Office to charge taxpayers for the provision of binding private rulings and other binding advice contained in the recently released Tax Reform Package may deliver benefits for business, according to Taxation Institute of Australia President, Ken Spence.

"This proposal – and it is only a proposal at this stage – is welcomed by the Taxation Institute as one way to enable the ATO to provide more timely rulings especially to business where delays in obtaining a tax clearance to a project can spell the end of the project in many instances," Mr Spence said.

The New Zealand Inland Revenue adopted a user pays system for business and other changes to their rulings system some time ago and these have by and large worked well.

"By appropriately charging for work undertaken in providing a tax ruling for a major project, the ATO may be more able to commit adequate resources to it."

"For example, these additional resources may allow the ATO to more readily seek experienced internal and external legal counsel to deal with complex matters," he said.

However, the Taxation Institute stated that whilst the proposal has much merit, the Government would need to be very careful that the ‘user pays’ concept does not lead to individual taxpayers and small business being disadvantaged.

"Safeguards would need to be put in place to ensure that advice on routine business tax issues for individuals and small business would not be neglected or given a low priority in comparison to ‘user pays’ advice," Mr Spence said.

"In addition, with the proposal to make oral advice provided by the ATO binding for simple issues, the Taxation Institute would not want to see a situation where the ATO is unwilling to provide oral comment on issues for fear of being sued if wrong and individuals and small businesses being unable to afford the cost of a private ruling," he warned