Australia's Future Tax System

Architecture of Australia's tax and transfer system

11.2 Community concern

There has been a lot of community concern in recent years about the complexity of the tax‑transfer system and the level of compliance costs, particularly from the business community.

In its Tax Reform Blueprint, the Australian Chamber of Commerce and Industry (ACCI 2004) highlighted, as two of its top five tax issues: the cost of tax compliance; and complexity in state taxation. It noted that surveys of business show that tax is consistently identified as a major problem. It drew attention to the ad hoc manner in which state taxes are applied — 'with different rates, exemptions and definitions applying in different States to economically identical transactions and assets' — and the increased compliance costs that result for businesses operating across multiple jurisdictions.

In its report to the Australian Government, the Taskforce on Reducing the Regulatory Burdens on Business (Australian Government 2006) noted that tax was rated by business as being among its highest regulatory burdens. It also noted the need to tackle the cumulative tax compliance burden as a strong and recurring theme of submissions to the Taskforce.

In 2007, the Business Council of Australia and the Corporate Tax Association (BCA and CTA 2007) released a report outlining concerns with the division between the Australian Government and state tax systems.The report stated that there were up to 56 different taxes that Australian businesses had to deal with — 21 Australian Government taxes, 33 state taxes and two local government taxes — and noted that this was more than twice the number identified in the United Kingdom. The report drew attention to 'the highly inefficient manner in which some revenues are raised', noting that for the 92 businesses surveyed, the corporate income tax accounted for two‑thirds of the tax borne. The remaining third was raised through 'a complex array of 50 additional taxes', some of which yielded relatively little revenue but involved considerable compliance costs. The report also highlighted the additional complexity and compliance costs due to differences in the rates and bases of similar taxes applied by individual States.

Individual taxpayers and transfer recipients are also concerned at the level of complexity they face in the tax‑transfer system. For example, a strong theme in the Joint Committee of Public Accounts and Audit inquiry into tax administration was the complexity of our tax laws and the uncertainty and costs this imposes on the community (JCPAA 2008).

With regard to the transfer system, welfare advocacy groups such as the Australian Council of Social Service (ACOSS) have over the years expressed concern about the capacity of some vulnerable income support recipients to understand and properly deal with the requirements for gaining and maintaining eligibility for payments. There has also been ongoing concern about the impact of system complexity on outcomes for other Australians, such as working families who are required to estimate their future income in order to receive family assistance.