Jason Falinski (Mackellar, Liberal Party) Share this | Hansard source

On behalf of the Standing Committee on Tax and Revenue, I present the committee's report entitled Taxpayer engagement with the tax system, together with minutes of the proceedings and evidence received by the committee.

Two thousand years ago, the Bible records that, when Jesus Christ wanted to demonstrate to all that everyone was equal before our Lord, he gave the example of the two most odious people in society at that time: one was a prostitute, and the other one was a tax collector. While some may see this report as an act of Christian kindness, I would rather see it as an update on 2,000 years of tax collection and where we stand today.

Taxpayer engagement in the current century is not what it was 2,000 years ago, much less 20 years ago. Globalisation, technical innovation and budget pressures have all made it a different business for both governments and the taxpayers. During the inquiry, the ATO gave extensive evidence about its reinvention as a modern, automated tax administration system. There was a lot to be confident about. Compared with other nations, the ATO appears to be doing well by a number of measures, but the inquiry also raised some alarms which the committee was compelled to explore. In particular, the committee was concerned that tax complexity in Australia's tax system is impeding the ATO's transformation into a fully automated and intuitive system. We must be clear that automation is not the higher goal here but, rather, that lower compliance cost is, and automation is a road to that outcome.

In comparing advances in other nations, certain areas of tax policy stood out as problematic for Australia. Australia's complex system for claiming workplace related deductions, for example, was repeatedly highlighted as being out of step with approaches in other advanced nations. Sweden, the United Kingdom and New Zealand, for example, had standardised approaches which the committee was told had facilitated the shift to fully automated push return tax systems where few taxpayers have to lodge returns.

Tax complexity is a burden for the taxpayer and the regulator. It also does significant damage to our economy and to our society. It lowers productivity, perverts investment and results in lower wages. This report contains 13 recommendations to make tax obligations in Australia simpler, easier to administer and easier for taxpayers to comply with. The first recommendation calls for a complete review of the tax system by 2022 to achieve a system that responds to the rapidly evolving digital environment and is both easier to enforce and understand. To address more immediate needs, recommendations are also made to close loopholes associated with high-risk industries and the growth of the gig or sharing economy. The committee believes that the standardised workplace expense deduction scheme is needed and recommends for this with the proviso that claims above that standard are allowable if it be fully substantiated.

The committee also supports considerations of an ABN based withholding tax system, with the potential for rates to be industry specific, akin to the model in New Zealand. The recommendation will provide greater certainty for business planning and reduce the potential for cash activity and tax avoidance. Other recommendations in this report aim to ensure that the ATO's automated systems genuinely assist taxpayers and reduce the potential for error. The committee calls for a review of behavioural economics, nudge tools and trialling outcomes to ensure they are effective and give more tax revenue for the taxpayers' buck.

Finally, while the digitisation of tax services has been seen as the silver bullet to old and new tax administration problems, the committee has concerns that some Australians are simply not ready to make that transition. In the committee's view, taxpayers have a right to exercise freedom of choice to meet their tax obligations by various means. The committee recommends that the ATO be more open about the forward phase-out plans it has for paper forms and information.

Taxpayers also deserve reliability in tax services and should not have an unimpeded choice of tax service providers and not have the ATO behaving in a non-competitive, neutral fashion. This report recommends that the ATO, as a priority, implements a service-level agreement with all stakeholders affected by the agency's changing practices—in particular tax agents, who are often impacted during peaks in business activity.

Accountability is the key to confidence. The committee's final recommendation is for the ATO to take a close look at its core mission statements to deliver a single cohesive and easily understood framework, a regulatory philosophy that clearly and simply outlines the rights and obligations of both the tax office and the taxpayers in tax-engagement processes.

In closing, I would like to thank the member for Page, who started this committee as the chair, but also I wish to thank the members for Parramatta, Griffith and Oxley, who were engaged participants in the inquiry, and also the members for Berowra, Forde, Boothby and Cowper, who also made invaluable contributions. I would like to thank Sharon and Loes from the secretariat. It is said that there's no such thing as a stupid question; I'm sure those two can come up with something that gets pretty close!

Report made a parliamentary paper in accordance with standing order 39(e).

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