The Chairman of the Business Coalition for Tax Reform, Mr. Mark Bayliss, today welcomed the progress on the Government’s proposed new consolidation tax regime but warned that unless there was close consultation - and responsiveness to that consultation - its success was far from assured.

Mr Bayliss said: “This is the biggest change in taxation since the GST. While there has been a generally positive initial reception and a very good consultation process to date, the consolidation proposal could still turn out to be a nightmare for business, particularly small and medium businesses.

“The key will be whether the Government and tax authorities continue to consult closely with taxpayers and avoid the mistakes that bedeviled the implementation of the GST and the Business Activity Statement. The business community is ready to work closely with the Government and taxation authorities to get the best possible result.

“A number of critical design features of the consolidation regime are still to be resolved.

Just as importantly, much will depend on the willingness of the Government and tax authorities to listen and respond to proposals to make improvements in the way the legislation and administrative arrangements achieve the policy objectives.”

Mr Bayliss said among the main design improvements still to be adopted were:

• Allowing the existing grouping provisions to remain in place for a sufficient period to ease the burden of transition, particularly for small and medium sized businesses and their tax advisors.
• Resolving a potential anomaly related to the interaction between current year losses and franked dividends paid from non-wholly-owned subsidiaries.
• The joint and several liability issues, listed for further consultation, but which appear to result in subsidiaries sold from a consolidated group, retaining liability for their previous group’s tax exposures in some cases.
• Rules for international transactions sketched out in the explanatory memorandum.

“The draft legislation is still incomplete. The release of further provisions well in time for the July 1, 2002, start date is critical,” he said.

“There are good signs that the Government and the Tax Office are aware of the need for a fast-track process of amendment of the draft legislation prior to its introduction into the Parliament. Of course the proof of the pudding will be in the eating.

“It is also clear – in the face of the tight timetable - that significant provision will need to be made for “technical corrections” after the new legislation has been passed. The cooperation of the taxation authorities and all parties in the Parliament will be critical for a smooth implementation.”

The Business Coalition for Tax Reform is the peak business body on taxation policy. It has more than 40 members from small, medium and large businesses across all sectors of the economy.