Business Needs a Better Way Forward than the Tax Value Method
10 May 2002Mr Mark Bayliss, Chair of the Business Coalition for Tax Reform
(BCTR), today said that business is determined to look for a better way
forward than the Tax Value Method (TVM) in improving the income tax
system.
Mr Bayliss said “The members of the BCTR remain strongly committed
to ongoing reforms to reduce the complexity, instability, uncertainty
and the costs of compliance of our current tax system. The BCTR is
firmly of the view that momentum needs to be maintained in relation to
fundamental tax reform.
“The BCTR commends the Board for the open and consultative process
it has undertaken in relation to the TVM. We support the adoption of
similar consultative processes more widely in the development and
evaluation of changes to Australia’s taxation system.
“After a careful and considered assessment over an extended period,
the BCTR has decided not to support the continuation of the Tax Value
Method project for the following reasons:
- The TVM legislation is complex
- The TVM is based on an economic concept that does not translate readily into an operational tax base
- The TVM calls for the identification of assets and
liabilities, many of which are not currently identified in all
taxpayers’ accounting records
- The net income formula has proved difficult to understand and to explain and will give rise to considerable confusion
- There are risks to the integrity of the tax base through
opportunities for arbitrage around liabilities involving cross-border
transactions. These risks will, in turn, give rise to new areas of
complexity, instability and uncertainty
- There is a strong likelihood that the TVM will add uncertainty and complexity to Australia’s international tax arrangements
- The changes proposed under the TVM apply only to the core
rules and significant complexity will remain in the many specific
policy measures that exist outside the core rules
- There would be significant transitional costs over an extended period
- Many benefits claimed on behalf of the TVM either have not
been established convincingly or could be achieved by other, less
disruptive means.
“The BCTR does not believe there has been a demonstration that the
benefits of TVM are likely to outweigh the costs and the BCTR is not
convinced that it would represent a significant improvement over the
present system.
“While investigation of fundamental reform must continue, over the
next couple of years there are pressing areas of business tax reform
that will require the immediate attention of the business community.
These include:
- the implementation and bedding down of the new consolidation regime
and a range of other business tax reform measures arising from the
Review of Business Taxation; and,
- the development and implementation of the program of reforms to modernise Australia’s international taxation arrangements.”
Simultaneously, a process should be put in place to investigate the
nature of the flaws in the income tax system. This should involve early
external input in the identification and assessment of problems with
our current tax system and options to address them. The BCTR would be
keen to work with the Board to develop this process.
The BCTR is made up of industry and professional associations from all sectors representing small, medium and large businesses.
The BCTR’s submission on the Tax Value Method will be available on the BCTR web site, www.bctr.org early next week.
Contacts:
Mark Bayliss, Chair Business Coalition for Tax Reform 02 9282 2970
Su McCluskey, Chair BCTR TVM Sub-committee 0438 123 137