|EMBARGO: 23 December 1998 2.00 pm
FIRST SERIES OF CONSULTATIONS COMPLETED
Following the release of A Strong Foundation on 23 November, the Review of Business Taxation conducted seminars in all capital cities. These seminars were held to encourage debate and discussion on the proposed objectives and principles of the business taxation system outlined in the paper.
The members of the Review would like to thank those who attended for their interest and participation. The input received from the seminars is of critical importance to the establishment of a strong foundation for business taxation. The Review will consider the issues raised in the seminars carefully when finalising its recommendations to the Government.
national Objectives and design principles
The seminars have played a key role in facilitating community reaction to the proposed national objectives and design principles for the business taxation system. In particular, concerns were raised regarding the relative importance of the national objectives for the business taxation system, the adoption of a comprehensive income base, the importance of international competitiveness and tax incentives, and the operation of the revenue neutrality constraint.
In several of the seminars it was suggested that certainty should be a primary objective of our business taxation system. The Review acknowledges that ensuring that taxpayers have certainty with regard to their income tax liability is crucial. This is reflected in A Strong Foundation where certainty is identified as a key dimension of the proposed simplification objective and where certainty and reliability are both proposed as administrative design principles.
Questions were raised about the relative importance of the national objectives of optimising economic growth, ensuring equity, and facilitating simplification. The Review is interested in receiving submissions on the proposed objectives in order that it can be better informed about the views of others and their relative merits. It was also suggested to the Review that promotion of national savings be separately identified as a national objective.
Comprehensive income taxation
In the majority of seminars the choice of tax base and the role of comprehensive income taxation were raised. The Review acknowledges that there is still considerable debate concerning the choice between an income, expenditure or schedular taxation base. For a number of practical reasons outlined in A Strong Foundation (page 72), consideration will not be given to the latter two as part of the Review of Business Taxation. The Review reiterates that, while comprehensive income taxation is a key policy principle for consistency in design of business taxation arrangements, that principle will need to continue to be applied in a practical manner. Notwithstanding the Reviews commitment to comprehensive income taxation, it is also important to note that the Review will not be ruling out use of well-designed tax incentives in the new business taxation system including, for example, a realisation basis for fixed assets like building, machinery, plant and equipment.
International competitiveness was also highlighted by many participants as an important consideration in the design of our business taxation system. As its terms of reference also underline the importance of international competition, the Review commissioned a study comparing Australias business taxation system with numerous other tax systems. This information paper was released today and will be available on the Reviews internet site (http://www.rbt.treasury.gov.au/publications/paper2/index.htm).
Concern was raised by some participants about the operation of the revenue neutrality constraint on the making of recommendations by the Review. There are some difficulties in estimating accurately the revenue consequences of many components of business taxation, especially those arising from increases in long term growth prospects. These issues will be considered further by the Review.
Reforming business tax processes
The seminar attendees gave broad support to the proposed process reforms. In particular, there was support for the proposals to improve public consultation and to apply integrated, team-based arrangements in the development of business tax policy. It was also considered that the establishment of an advisory board would improve the quality of taxation policy, administration and legislation, particularly if membership of the board came predominantly from the private sector.
Interested parties are reminded that submissions relating to all matters raised in A Strong Foundation should be lodged by Thursday 31 December 1998, addressed to:
23 December 1998
For more information contact: