Australia's Future Tax System

Architecture of Australia's tax and transfer system

11.7 Recent attempts to address complexity in the tax‑transfer system

A range of steps have been taken over the past few years, or are in the process of being implemented, by the Australian and state governments in an attempt to address the growing complexity of the tax‑transfer system. These include:

  • improving the process of evaluating new policy proposals, with greater emphasis being given to the assessment and reporting of compliance cost impacts;
  • improving the clarity of legislation through, for example, the application of plain language and principles‑based drafting techniques;
  • increased consultation on policy design and its implementation;
  • abolishing a number of inefficient state taxes through the Intergovernmental Agreement on the Reform of Commonwealth‑State Financial Relations and harmonising the structure of other state taxes, such as payroll tax;
  • reducing the complexity and compliance costs associated with the existing stock of legislation through targeted measures;
  • implementing, by 2010, a single standard business reporting portal, via which business can provide information to all levels of government; and
  • several States setting targets to reduce the total burden of their regulation.

At an aggregate level, the effectiveness of these steps is difficult to ascertain due to parallel implementation of new policy that has added to the complexity of the tax‑transfer system.

Reducing complexity through targeted measures can be hard to achieve, as it typically involves a trade‑off between simplicity and other policy objectives and results in both winners and losers unless policy settings are made more generous. Broader reform provides an opportunity to take a systemic view of the trade‑offs between simplicity and other policy objectives and to balance the demands of individual stakeholders through at least partially compensating policy adjustments. An awareness of the factors that drive complexity and operating costs may assist in gaining community acceptance of the trade‑offs required to achieve a measurable reduction in the complexity and operating costs of the tax‑transfer system.