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Taxation Institute of Australia - Budget Response 2008

Publication date: 13 May 08 | Source: THE TAX INSTITUTE

Australia's premier professional tax body, the Taxation Institute of Australia, has welcomed elements of the Federal Budget, however, said there appeared to be some inconsistencies between the tax initiatives and the key policy platforms that were outlined.

President of the Taxation Institute, Ms Sue Williamson, said the Tax Institute was pleased that a number of recommendations of Australia's tax professionals had been considered in the Budget handed down by the treasurer, Wayne Swan.

"We fully support the personal income tax cuts, the reduction in withholding taxes on managed funds, clarification of consolidation amendments, the expansion of the small business concession and, most importantly, the official announcement of the tax system review," Ms Williamson said.

"However as a complete package, the Federal Budget appears to be based on making independent decisions to drive revenue, yet in some cases they have not considered other key policy platforms announced in the Budget.

"In our view, taxation should not be an independent policy item to raise and distribute income, but should also be used to help drive the key policy directions set for the country."

Ms Williamson said some of the examples of their being a lack of integration between tax and other key policy plans included:

The Luxury Car Tax:
"On one hand, the Government has devoted enormous funding to climate change issues, yet on the other hand has done nothing in the tax area to encourage environmentally friendly behaviours given that the increase in luxury car tax will impact equally on climate friendly cars and gas guzzlers," Ms Williamson said.

Non-clarity around Emissions trading scheme:
"The Government's failure to commit to addressing tax issues relating to an Emissions Trading Scheme (ETS) prior to its taxation review could impede the success of the climate change measures announced," Ms Williamson said.

"You cannot expect business to adequately plan for an ETS regime (with estimated revenue from permits of $22b) when the full tax consequences are not properly understood at the time of its introduction. Business really needs at least 18 months to grasp the tax impacts of an ETS, not a few weeks or months."

Ms Williamson said in general terms; there were no major surprises in the budget.

"The Government has committed to a "root and branch reform" therefore, we did not expect our concerns about the tax system's complexity and significant compliance costs would be addressed".

Continued Complexity to Tax Laws

"With some 50 unlegislated announcements, the ETS tax issues and the taxation review being undertaken, one would have to ask how the average tax professional is supposed to provide advise to their clients with any certainty.

"We are disappointed that the issue of uncertainty around tax has not been addressed in this Budget and in fact with some measures we have seen increased complexity. For example, while the Taxation Institute supports the Government's policy to target welfare benefits and payments, the measures are too complex and expensive to administer.

"The Taxation Institute is encouraged that the Government has started reviewing the tax process, although on saying this, we expect a truly independent review that works with business and tax professionals to address such complexity and associated compliance costs.

"We look forward to working with the Government to address these issues, so that together we can develop a fairer and better tax system for all Australians."