Australian Tax Forum
Australian Tax Forum is a prestigious quarterly journal with the objective of providing discussion on issues in tax policy, law and reform amongst tax professionals. It is an essential reference source for understanding and contributing to the development of taxation systems worldwide. Australian Tax Forum is aimed at those who want to influence the future development of tax policy. It is an important journal for tax policy makers, academics and libraries.
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Articles from the current issue:
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Asymmetric treatment of tax losses Add to cart
01 Apr 2012
The current asymmetric taxation of business gains and losses causes the effective tax rate to exceed the statutory tax rate. Resulting different effective tax rates across different investment and business structure choice options distort the choices among these options with a loss of efficiency. A potentially important automatic stabiliser also is lost. An ideal solution would combine refunding losses together with the removal of tax expenditures. Neither reform component seems achievable in the immediate future. A more likely reform strategy would involve a combination of carry back of losses and indexation of losses carried forward.
This strategy would reduce distortions arising from the arbitrary annual accounting tax year being shorter than the life of investments which over time generate an economic profit, but it leaves high effective tax rates on risky investments by small businesses.
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The not-for-profit sector and the tax forum Add to cart
01 Apr 2012
The Commonwealth Government is undertaking a range of reforms in relation to the Not-for-profit (NFP) sector. These reforms include the establishment of a specialist regulator, the Australian Charities and Not-for-profit Commission (ACNC) which will now commence operation on 1 October 2012. They also include a proposal for a statutory definition of “charity”, expected to be in operation by 1 July 2013. At the same time, the Government has announced changes to the tax legislation to address what were seen as undesirable outcomes arising from the High Court decision in FCT v Word Investments Ltd in 2008. Against this background, it is perhaps surprising that although taxation of the NFP sector was not on the agenda at the Tax Forum held in Canberra in October 2011, it was announced soon after that there would be a review of the tax concessions available to the sector.
This paper considers what tax changes are currently being proposed and what factors any review of the concessions will need to take into account.
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State taxes: From a problem acknowledged to a problem addressed? Add to cart
01 Apr 2012
The Commonwealth has a long history of hectoring States about the inefficiencies of their taxes and the discussion at the October 2011 Tax Forum was another case of the Commonwealth again making its case for State tax reform. For States, this criticism of their taxes is understood but unhelpful, especially when the Commonwealth offers no substantive support to facilitate such reforms – as was the case at the Tax Forum.
This paper argues that the current stance by the Commonwealth is a break with the past and that it should adopt a facilitation role. While options available to the Commonwealth are many, and historical precedent is a sound guide, it should only adopt a facilitation role after most States have shown a readiness to map out and act upon an accepted fundamental tax reform pathway.
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Stamp duties, land tax and housing affordability: The case for reform Add to cart
01 Apr 2012
House prices and rents have increased ahead of average earnings over the last 25 years tipping more and more Australian households into housing affordability stress. The deterioration in housing affordability is in part due to a set of Federal and State tax arrangements that distort the use of land and buildings in ways that impair the efficient operation of housing markets. State government taxation of residential land and buildings in the form of stamp duties and land taxes are an important influence because they offer preferential treatment to land and buildings that are owner occupied.
This paper analyses the case for reform, and assesses what impact their introduction would have upon land prices based on modelling of the Melbourne
housing market. We argue that there is a compelling case for the abolition of stamp duties and their replacement by a broad-based land tax. Furthermore transitional arrangements are put forward that would gradually introduce the reforms such that no existing home owner would pay land tax if they had already paid stamp duty when purchasing their home. These arrangements would aid the introduction of reform by ensuring that no property owner must meet an additional tax.
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Taxing savings after Henry Add to cart
01 Apr 2012
This article discusses the recommendations of the Henry Review for the taxation of personal savings in Australia’s tax system. It examines the Review’s approach to defining the benchmark and policy criteria for taxing personal saving. It then focuses on the current tax treatment and the Review’s recommendations for the taxation of home ownership (the largest single component of Australian household wealth); investment income and capital gains in respect of rental property investment, shares; and interest on bank accounts.
Finally, it considers the Review’s suggestion that a bequests tax should be further examined for Australia.
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Prescriptions for reform of Australia’s superannuation tax concessions Add to cart
01 Apr 2012
The highly controversial and often politicised issue of Australia’s retirement savings regime featured prominently throughout the two day Federal Government’s October 2011 Tax Forum. Calls for reform of this regime are by no means new. Reform debate over the years has focused on each of the three separate pillars: the age pension, compulsory superannuation, and voluntary saving, as well as the interaction of those three elements. However, recently there has been a significant shift away from reliance on the age pension, with its associated risks falling to the government, to a defined contributions scheme where the associated risks fall to the individual taxpayer.Consequently, Australia’s superannuation regime is predominantly subject to current debate, and, as such, the subject of this article.
This article considers the history of Australia’s retirement savings regime, along with a framework for evaluating the superannuation tax concessions. It then discusses the recommendations of the Australian Future Tax System (AFTS) Review Panel and ensuing debate at the Tax Forum. Finally, it suggests two proposals to achieve the objectives of the AFTS Review in relation to retirement, those objectives being a system which is broad and adequate, acceptable to individuals, robust, simple and approachable, and finally sustainable. The first, whilst potentially requiring some ‘tinkering’, is relatively simple and a blue print has already been provided to the Federal Government – the adoption of Recommendations 18 and 19 of the AFTS Review.
The second is one of management. Superannuation concessions are fundamentally categorised as tax expenditures and the management of these tax expenditures, not just the reporting, should be undertaken.
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Tax reform and ‘rough justice’: Is it time for simplicity to shine? Add to cart
01 Apr 2012
The need for simplification is often identified as a key consideration in any discussion of Australia’s tax system. But just how important is simplification in the Australian context? And to what extent will it feature in any future tax reform post-Henry and Tax Forum? While there has been much discussion of tax simplification over the years, progress in achieving genuine simplification has been modest at best.
This article reviews the tax simplification literature and analyses recent proposals aimed at reducing complexity. It canvasses the notion that simplification may be gaining some well-deserved attention compared to the other criteria of a good tax system. This may lead to reformers preferring measures that potentially reduce equity for certain taxpayers (and even possibly some efficiency/neutrality), in favour of a more streamlined and simplified system overall. Unfortunately, however, many of the simplification initiatives that have emerged from recent reform may not achieve the desired outcomes of a simpler tax system.
The article concludes that in order to achieve genuine simplification, a mixture of policy initiatives and administrative measures are still required – together with bold political initiatives.
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Strengthening the ATO’s existing governance framework – Is the proposed tax system advisory board the answer? Add to cart
01 Apr 2012
One of the issues examined at the Tax Forum that was held in Canberra in October 2011 was whether there are better ways that institutional arrangements for the tax system can be used to improve taxpayers’ experiences of the tax system. The Assistant Treasurer acknowledged during a speech he gave at the Forum that the Australian Taxation Office (‘ATO’) is considered a ‘world leader’ in tax administration but went on to state that it was crucial that the ATO as the keystone of the tax system can continue to meet the challenges of the tax system now and into the future. It is in this context that he proceeded to announce that it was the Government’s belief that a Tax System Advisory Board (‘Advisory Board’) could add value to the administration of the tax system and enhance the reputation of the ATO as a world leading administration.
This paper analyses whether the proposed Advisory Board could provide the answer to strengthening the ATO’s existing governance framework. It will undertake this analysis in four parts. Part one of the paper will explain the background to the Advisory Board proposal which provides the necessary context for the ensuing discussion and analysis. Part two will examine the current governance framework of the ATO, including a discussion of possible limitations of this framework.
This will be followed by an examination of the case for reform in part three of the paper which will include a review of the national and international literature related to governance arrangements for tax administrations. Part four will then draw some conclusions.
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Tax reform - A plan for the future (editorial) Add to cart
01 Apr 2012
On 20 March 2011, the Federal Government announced its plans for a two-day tax forum, bringing together representatives of community groups, businesses, unions, and governments, academics and tax practitioners. The resulting Tax Forum, held in the Great Hall of Parliament in Canberra on 4 and 5 October 2011, was attended by approximately 180 individuals representing a diverse range of interests. Twenty-five of those participants were academics and tax experts. This special issue of Australian Tax Forum draws on the experiences and expertise of those academic experts who were involved in the forum process.
The articles which follow provide a detailed assessment of what was achieved and the whether the Forum and subsequent deliberations have made a positive contribution to the Australian tax policy debate.
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The politics of Australian tax reform beyond the national tax forum: Context and challenges Add to cart
01 Apr 2012
This article provides an overview of the political and economic context in which the Tax Forum was held. While the Forum had unlikely beginnings in that it was a concession to secure the parliamentary support of independent MP Rob Oakeshott, it can be argued that it did make a positive contribution to the tax reform process. Given the growing constraints on the political capacity of Australian governments the viability of tax reform increasingly depends on building broad-based community support. In these terms it can be argued that Forum provided a valuable opportunity to discuss reform options and gauge the level of political support for reform proposals outside the increasingly adversarial arena of party politics.
The Forum may have provided an opportunity for key stakeholders to establish some common ground in relation to tax reform, but given the formidable political barriers to reform the article concludes by assessing the need for fundamental reform of the tax policy process.
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Implementing an allowance for corporate equity Add to cart
01 Apr 2012
The government’s decision to commission research into an allowance for corporate equity (‘ACE’) for Australia portends major change to Australia’s corporate tax, and an even more significant departure from the tax policies that have been considered orthodox for the last 25 years. This paper analyses what an ACE could mean for Australia – what it is hoped an ACE would achieve, how it is meant to work, where the fault lines are to be found, what still remains unsettled in the basic design, who would win and who would lose under such a policy and why.
