04 Nov 11 Preamble
News this week was predictably dominated by the introduction of Bills containing the MRRT, extended PRRT and increase in the superannuation guarantee rate. While these are all understandably important policy priorities for the Government, myriad announced changes that will also have a significant impact on taxpayers’ compliance activities should not be overlooked.
The Tax Institute has not forgotten that a proportion of the funds from the levying of the MRRT were earmarked for the financing of ‘significant tax reform’ that ended up being little more than tinkering around the edges with (among other things) a 1% cut in the corporate tax rate. Most businesses continue to struggle with ever more complicated tax laws, so much so that a 1% corporate tax rate cut may not look as attractive as a measure that would slash the cost of compliance. Central to lowering the cost of compliance is tax laws that are more certain and reliable – a task that is typically at odds with the introduction of retrospective legislation.
Last week, I referred to an amendment to the PRRT that is contained in Tax Laws Amendment (2011 Measures No.8) Bill 2011 (“TLAB 8, 2011”) that is due to apply from 1 July 1990. Following on from that Bill, on Melbourne Cup day the Assistant Treasurer announced an overhaul of the transfer pricing laws, and a clarification (that the transfer pricing rules in tax treaties operate as an alternative to the domestic rules) that will apply from 1 July 2004! For tax professionals, the surprise of this announced retrospective amendment felt a little like yet another celebrity divorce – disappointing, but in many ways expected.
We will of course continue to push the Government to make tax laws in a fashion that is fair and certain. Constant changes in tax law policy (especially when retrospective) are neither productive nor conducive to sound decision making for either the Government or taxpayers.
To quote the House Economics Committee’s report on TLAB 8, 2011 “Legislating retrospectively should not be done lightly because it is very easy for it not to be fair and for it to create uncertainty.” Notably the Committee also acknowledged the effect on taxpayers: “tax laws are relevant to the investment decisions of multi-national corporations and that the Parliament needs to be mindful of how its legislation presents Australia in the global marketplace.”
We say – hear, hear!
Please see below for details of other activities this week. Your input, as always, is very welcome at Tax Policy.
Deepti Paton ATIA