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Vision for tax system crucial to future

Board of Taxation chair Michael Andrew has stressed the importance of implementing a better model for Australia’s taxation system and has unveiled a set of recommendations that have succeeded overseas.

“If tax is so important and integral to government policy, then we need a better process by which these good suggestions and good ideas are acted upon and, more importantly, people have confidence [in them],” Andrew told the Institute of Public Accountants Victoria Congress in Torquay on Friday.

“We have a very outdated tax policy process. It’s opaque.

“Wouldn’t it be great if you could tell when this is going to be released, what the key things the government is and isn’t working on?

“It would help tax advisers enormously.”

He also unveiled a set of recommendations endorsed by the Board of Taxation.

“The first thing is, like any business or project, when you want to do something you set out a vision for what you want to get to,” he said.

“At the moment, we have no vision for what we want our tax system to be: we need to set out guiding principles of what we want our tax system to be, then we need a clear roadmap as to how we’re going to get there.

“Secondly, we need a charter which sets out the rights and obligations.

“The same way we have a charter of budget honesty, we should have a charter of tax honesty and we should basically set down the parameters of whether we’re prepared to continue to announce tax legislation by press release, whether we’re prepared to have retrospective legislation, and what the various roles and obligations of the various parties are.”

He said that would not only put pressure on the government, but also clarify the roles of key stakeholders in the industry, which in turn would introduce more consultation and lead to more bipartisan acceptance.

“[Lastly], if tax is really important, then we need to staff it properly and you need some degree of accountability,” he said.

He used the United Kingdom as an example of how to improve the tax policy process.

“In 2010, they said let’s actually put out a roadmap as to what we want the tax system to be and let’s try to give people some clear foresight into what that might look like,” he explained.

“They had an objective to be the most competitive tax system among G20 nations – that’s the goal, so to get there, they need to increase transparency, increase predictability of legislation, increase consultation and simplify the tax rules significantly, which resulted in the formation of independent agency the Office of Tax Simplification.

“To date, they have gotten 51 per cent of their recommendations implemented in the UK and there are another 29 per cent that have been accepted, which are in process, so 80 per cent of their recommendations of around 133 are already done, in order to improve their tax system.

“We have no such body doing those things.”

However, he pointed out the Office of Tax Simplification was autonomous.

“My personal view is that I’m not in favour of the Tax Reform Commission at all as I just don’t think creating another body is going to solve the problem,” he said.

“I’d rather get some clarity around who is doing what at the moment.”

In response to a proposal made last month by the SMSF Association to remove superannuation tax policies from the short-term budget cycle and perhaps link them to the Intergenerational Report, he told selfmanagedsuper: “We do have to look at this as part of a comprehensive retirement incomes policy and it’s not just super changes, there are other changes to personal income tax which also would impact the situation.

“You will [find out in due time] and I think you’ll find there’s quite a bit in there as it’s one area where they’ve done a lot of work.

“But we need to find a better model by which we can actually determine where we’re going and how we get there at the end of the day.”

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