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2 J. Austl. Tax'n 1 (1999)

handle is hein.journals/jouaustx2 and id is 1 raw text is: Editorial

Associate Professor Stephen Barkoczy

In the foreword to the first discussion paper
issued by the Review of Business Taxation, the
Chairman of the Review, John Ralph, noted:
The Australian tax system can be likened
to the leaning tower of Pisa. Adding
another storey will not reduce the chance
of collapse. It would only make it more
certain. Like the leaning tower, the
business tax system needs a sound and
stable foundation before we can start the
task of rebuilding.
As the Review correctly notes, the problems
with our current tax system is that it is not based
on a coherent set of principles and has developed
in an ad hoc manner. The Chairman states that
to avoid perpetuating this situation a sound
foundation  and  a  framework  of coherent
principles capable of adaptation to meet
changing needs and policies is required.
The need for a stable and sensible base from
which to build our New Tax System cannot be
denied. But what exactly will this base be?
What effect will the report of the Senate Select
Committee on a New Tax System have on the
Government's tax reform proposals announced
in August 1998? And what is to become of the
Tax Law Improvement Project? The rewrite of
our existing income tax laws is nowhere near
complete. In particular, the bulk of the specialist
liability rules intended for Chapter 3 of the
Income Tax Assessment Act 1997 have not yet been
released. It appears that the    Tax  Law
Improvement Project will be subsumed into the
tax reform process. Assuming this will be the
case, an entirely new focus will need to be
adopted as the project was originally only
concerned with small p rather than large P
policy matters.

The Review has proposed that the debate about
the design and operation of the business tax
system should focus on:


optimising economic growth;
ensuring equity; and
facilitating simplicity.

Many principles underpin these objectives. Most
people would agree that:
*  tax considerations should not make Australia
an unattractive location for inbound
investment, nor drive domestic investment
*  individuals in similar circumstances should be
taxed similarly, while the burden of taxation
should fall on those more able to pay; and
*  tax laws need to be certain, uniform and
While it is obviously sensible to focus on
developing a sound framework upon which to
build our New Tax System, experience would
suggest that it is not identifying the objectives
which underpin a tax system that causes
problems, but their implementation. In recent
times the practice of taxation law has been
plagued  by   complicated  legislation  which
promulgates confusing court decisions and
thereby leads to taxpayers requiring time-
consuming and expensive advice to resolve what
should often be basic issues. Idealists might hope
that our New Tax System will overcome these
problems. However, a cynic (or, perhaps, realist)
might be more inclined to expect that our New
Tax System will most probably have its own
idiosyncratic complexities and shortcomings and
that while we are laying new foundations, we
might just be building another leaning tower.
January 1999

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