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Radical changes to current law must be introduced in stages, says TIA

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

In its detailed submission to the Review of Business Taxation, the Taxation Institute of Australia advised the Ralph Committee that the proposed radical changes to the current law need to be introduced in stages in order to maximise business certainty in relation to procedure and outcome.

"Many of the issues and options raised in A Platform for Consultation involve radical conceptual changes to the current law relating to business taxation," said Mr Gordon Cooper, President of the Taxation Institute of Australia.

"The new framework is based on economic substance rather than legal form and the coalescence of tax and accounting principles will sweep aside well established and well known precedent. This fact is not an obstacle to change per se, but does make it imperative that the new legislation framework is unambiguous and comprehensive," Mr Cooper said.

"Given these changes, the Institute is concerned that the proposed timetablefor implementing the reforms may be insufficient and result in an increase in confusion and uncertainty," he said.

The Taxation Institute has been a long time supporter of tax reform and a significant contributor to the current tax reform debate. Although the Institute embraces those broad aspects of A Platform for Consultation which promote the development of a framework for consistent and equitable taxation treatment, it has serious concerns regarding a number of key propositions contained in the report.

"The Taxation Institute strongly objects to a number of key propositions contained in the report including the proposition favouring the drive towards tax comprehensiveness at the expense of simplicity," Mr Cooper said.

"Successful tax reform is one which brings about changes premised on simplicity and equity, the lowering of compliance costs and the minimisation of tax avoidance opportunities, resulting in ease of administration for taxpayers and the Australian Taxation Office alike."

"The move away from simplicity will not lower compliance costs nor assist businesses understand and implement the new system," he said.

In addition, the Taxation Institute of Australia's submission outlines its objections to key propositions contained in A Platform for Consultation. These include:

That the concept of investment neutrality impacts differently on large and small business (this concept is particularly the case for businesses operating in sophisticated capital markets); There should be no move towards taxing economic gains as opposedto realised gains; and The balance sheet or cash receipts method of calculating taxableincome totally ignores accounting principles and would result in over50 years of court precedents on capital/income dichotomy beingrendered ineffective.

"The Taxation Institute is also very concerned by the discussion of specific issues and avoidance measures before the new framework for business taxation is determined," Mr Cooper said.

"While the Taxation Institute acknowledges the importance of general anti-avoidance provisions to ensure the robustness of the new system, discussion of specific issues and measures before the new framework for business taxation is determined is premature," said Mr Cooper.

"Given the report, A Platform for Consultation, is a discussion paper coveringa myriad of corporate tax issues that are likely to be implemented in stages, development of any specific anti-avoidance measures are unlikely provide certainty for either taxpayers or the Government," he said.