Andrew Murray (WA, Australian Democrats) Share this | Hansard source

I wish to speak about the Tax administration report as well. In leading into my remarks, I note that the previous speaker, Senator Watson, has been 27 years on the Joint Committee of Public Accounts and Audit, which is an astonishing length of service. It is one thing to be on a committee, but it is quite another to make that sort of contribution of depth, substance, thoughtfulness and sometimes, as I said the other night, even lateral thinking, which is a very valuable contribution. You will find Senator Watson’s fingerprints all over this last tax report, as you will also find mine. I am but a pup compared to Senator Watson; I have only spent 12 years on the committee. But he is right: it is the senior committee. It is a very important committee.

I would urge and hope that the Labor Party in government will indeed introduce four-year terms, preferably fixed terms, for the House. I think it is important that we introduce greater security of tenure for lower house people in particular. I have noted over my time less and less sense of belonging and attachment to and working on committees, simply because members feel so insecure that they are constantly out in their constituencies. You actually need the parliament’s work to be done from a parliamentarian’s, not just a politician’s, perspective. So I urge all the new members of the committee and all the participants in the committee to give it a full go, and I urge the government to also introduce such constitutional changes as are necessary to enable people to have the security of tenure which will allow them to give their full attention to parliamentary committees such as the JCPAA.

I want to compliment the secretariat on this committee and the new chair, Ms Grierson. This inquiry has been a drawn out, dragged out affair, partly because of the election, and it has been difficult to tie all the themes together. I must say that I was very impressed by the way it was finally done.

Overall, the committee was satisfied with the performance of the Australian Taxation Office—and do not take that as light or mild praise. The Australian tax office has advanced its abilities enormously over the last two decades. It is more able, more professional, more considerate and more efficient than it ever was. Like everyone, there is still room for improvement, but let us not say ever that we do not have a tax office that ranks with the very best internationally. It deserves credit where credit is due.

The report has 18 recommendations. Eleven apply to the tax office, five to Treasury, one to Finance and one to the parliament. The clear theme in submissions and in the evidence is that we have to get rid of the complexity which bedevils our tax system. It is neither simple nor efficient. It inhibits a broad based approach to revenue gathering. That is not the fault of the tax office; that is the fault of the parliament. Really, it is up to the parliament to say to the executive: ‘Enough’s enough. We want a simpler tax system.’ That was a clear theme.

Despite the importance of tax bills, we still find that governments take tax bills which are not presented as exposure drafts, take them to the cabinet, get them signed off and then expect their parliamentary party to march to that drum, when the very complexity and the very nature of tax legislation is such that it should in fact be in long gestation, have a great deal of consultation and be subject to thorough parliamentary review and amendment—and that does not occur sufficiently. Much tax law is rushed or waved through. As far back as 1993, the committee’s report on tax administration recognised the need for thorough consultation on tax law—I sounded like Peter Sellers when I pronounced the word ‘law’, didn’t I!—and this view is now widely held in academia as well. The committee has recommended more public consultations on tax law, more consultation before governments announce the policy intent of tax law and more exposure drafts of tax laws.

With respect to the need to lodge tax returns, compared with some countries Australia has very high rates of lodging tax returns. The rate in Australia is almost 100 per cent—I suspect it is a lot lower, because there are people who orbit right outside the tax arena. In the United Kingdom, for example, it is only 37 per cent. In New Zealand, it is only 31 per cent. That does not imply low compliance there; what it means is that you do not have to put in your tax returns—and that is a place we need to get to. Too many Australians put in tax returns, and it is not necessary. The ATO have proposed a prefilling tax return scheme. That is a good idea, but it is treating the symptoms, not the cause. You would be far better off reforming the system so that Australians pay their tax and do not have to put in tax returns because the tax is taken off at either the source of consumption or the source of income.

The committee also recognised that the end-of-year tax refund is popular in Australia. Researchers have stated that it allows people to preserve a sense of control and gives them a sense that they are getting their fair share back in the form of a refund, so that complicates matters. Some people, including me, like to put in a tax return and get a rebate. It is a nice little human characteristic. And then, every now and then, they give you a thump, and you do not get a rebate; you have to pay more in.

The advantages of removing the need to lodge a return for many taxpayers would be saving billions of dollars annually in compliance costs. Further, the constant growth in deductions poses a potential threat to the tax base. Tax expenditures are a less transparent way of distributing public funds than direct appropriations. Indirect outlays are confusing and making complex our system. I hope that, when my own report into budget transparency comes down and you read that in conjunction with the Auditor-General’s reports, you will note a belief that our tax expenditures indirect outlay system needs to be radically reformed as well. The committee recommended that the government’s comprehensive tax review, Australia’s Future Tax System, known as the Henry review, investigate this issue.

We had a brief look at the New Zealand system, and we received evidence about the simplicity of some aspects of the New Zealand system, particularly in relation to fringe benefits tax. The New Zealand approach is efficient because it targets the main expenditure areas in fringe benefits tax, such as cars, low-interest loans, and free or subsidised goods and services. Australia took the other, more complicated path of capturing all expenditure areas and then legislating for exemptions. We spend a lot of time in Australia trying to comply on the small-ticket items, such as car parking. The committee recommended that the government examine in the review whether Australia should harmonise some of its business taxes with New Zealand’s simpler system, in line with the approach we already carry out on the economic front for closer economic ties and common laws and practices. One possible spin-off from this is that it might encourage uniform businesses taxes in the broader South Pacific area and lead to a uniform economic zone. I note with interest the Prime Minister’s aspirations in that area.

The committee was well served by external scrutineers during the inquiry. The most important of those was the Audit Office. The Audit Office has published a number of useful reports on the tax office and Treasury recently, including on tax debts in microbusinesses; tax havens; the taxpayers charter; data matching—wow, are they good at that now!; the tax expenditure statement; high-risk income tax refunds; and self-managed super funds. The Inspector-General of Taxation is another who has been put through his paces. He has finalised important reports into GST audits, potential revenue bias in private rulings and R&D syndicates. The Taxation Ombudsman, which is part of the Ombudsman’s office and was created out of a recommendation by the Joint Committee of Public Accounts and Audit in 1993, also assisted the committee during the inquiry. All three external scrutineers gave an independent and different perspective on the tax office, but all of them have respect for our tax office. All three agencies helped the committee arrive at its conclusions, and obviously there are acknowledgements for all those who have contributed to this report. This, I think, is the committee’s major tax administration report of the last decade. I hope that both the parliament and the government take due note of its recommendations.

Question agreed to.