Is there light on the horizon?

It seems we taxpayers may soon be able to read (and understand?) tax laws and will have less reliance on the ‘experts’. An article from the SMH 16/4/05

Taxpayers to profit from legal purge
By John Garnaut
April 16, 2005

The 10,000-page Income Tax Act is set to be slashed by a third in a plan to reduce taxpayers’ reliance on agents, accountants and lawyers to do their returns.

The legislation has tripled in size since the Howard Government was elected, while tax rulings, determinations, guidelines and court interpretations have multiplied.

Three in every four taxpayers are now forced to rely on agents to complete their tax returns, and many consider Australia’s tax system to the most complicated in the world.

Ultimately, the plan by the Taxation Board, the body which advises the Treasurer, Peter Costello, on tax matters, should result in faster processing of returns by the Tax Office, reduced reliance on tax professionals and lower fees for their advice.

The board’s chairman, Dick Warburton, said he would be pleased if half of the country’s tax lawyers were rendered redundant as a result of his measures. “I’d like to believe that,” he said.

The board aims to deliver a blueprint for cleaning up the tax laws to Mr Costello in June. It will include drastic pruning of the act, an annual “clarification” law to clean up anomalies, a pilot scheme to redraft the act bit by bit and regular reviews of all tax changes. “The act is incredibly complicated and it’s just been allowed to go on, so barnacles have grown on barnacles,” Mr Warburton said.

“We are cutting inoperative provisions and it means we can probably reduce the act by a third. It’s one hell of a project.”

The de-cluttering program will be strongly welcomed by individuals, small businesses and tax professionals, many of whom list the complexity of the tax regime as the nation’s single most pressing priority.

“The tax laws have grown like Topsy and they rank with the most complex in the world,” said Paul Drum, tax counsel at accountants CPA Australia.

It is the first serious clean-out since a simplification project was abandoned halfway in 1997, leaving two parallel tax acts where before there was one.

The Taxation Board agreed last week on what it wanted to change and a timetable to implement those changes, after receiving strong backing and resources from Treasury.

Mr Warburton said its investigations had uncovered extraordinary anomalies and duplication, including about 15 slightly different definitions of the word “associate”.

Perhaps the most important proposal from the board is an annual “tax hoover” law, designed to tie together clarifying amendments inadvertently made necessary by other changes. “These are anomalies that are not intended to be there but are a consequence of other changes – and frankly drive the Tax Office mad,” Mr Warburton said.

The board wants more flexible principles to replace legalistic “black letter” provisions – which are intended to proscribe new tax avoidance schemes as quickly as they are invented but often fail.

The re-drafting project will start with “tax on financial arrangements” provisions.

Officials and private sector professionals said the simplification program should proceed cautiously, given past failures.

“Don’t try and eat the elephant in one bite,” said Mr Drum. “Eat it in bite-sized chunks.”

Chief executives of leading companies want a wider reform program, with the most important objective being certainty rather than simplicity.

“Certainty does not come simply from any attempt to reduce the volume of legislation or write it in ‘plain English’ – but rather, from a serious reconsideration of the law making and law administration process,” the Business Council of Australia said this week.

Derek
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