Friday, September 10, 2010

Gee, how to make the tax system work is sort of obvious...

A visiting tax expert has urged Australia to lift the Goods and Services Tax and slash other taxes to make life simpler for business and householders.

Chas Roy-Chowdhury, head of taxation for the UK-based Association of Chartered Certified Accountants said he was hoping for an invitation to the summit.

He said at 10 per cent, our GST rate was low by international standards. It would still be attractive if lifted to 20 per cent. Only at 25 per cent had there been found to be problems with public acceptance overseas.

Australia's high headline rates of personal and company tax disadvantaged us internationally by making us appear to be a high tax country when we were not.

"If I was multinational looking to invest, the high rates before deductions, offsets and exemptions might put me off," he said...

The Henry Review’s plan to eliminate most exemptions and ensure all types of income were taxed, would make the headline rates lower at no cost to revenue and Australia more attractive.

"It also would be good for Australians," Mr Roy-Chowdhury told The Age. "If you can see what you are paying you buy in to the system; tax doesn’t become a separate dark art you leave to other people."

The Henry Review recommends that fringe benefits and employers’ super contributions be taxed as income in the hands of recipients and that the fringe benefits tax exemption presently enjoyed by charities be phased out.

It has published an indicative tax scale with only only two rates for most people - zero for the first $25,000 and 35 per cent for everything thereafter up to $180,000.

"That sort of simplicity is worth paying for," said Mr Roy-Chowdhury. "I would advocate smoothing the way by sending anyone adversely affected a cheque in the post." Asked if he was suggesting bribing losers to accept the new system he said transitional rebates had an honourable history overseas and were worth the expense.

He welcomed the Henry Reviews' aim of making the system so simple that tax returns were not needed, but warned Australia not to go as far as Britain had done and make returns optional.

"In introducing a new computer system the UK authorities have just discovered they have been collecting the wrong amounts of money," he said.

"‘People have been switching jobs so often it has overwhelmed the automatic system of updating records we had thought was serving us well."

Published in today's Age

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