A pre-Budget push for better tax policy.
Late last year the Treasurer, Wayne Swan, invited business and community groups to submit their ideas for the 2008/09 Federal Budget.
The submission by the Business Coalition for Tax Reform (BCTR) is of particular interest to AICD members. AICD is a founding member of the BCTR and AICD contributes to taxation issues through its involvement with the BCTR.
The BCTR’s submission includes 24 recommendations covering business taxation, personal taxation and the Intergovernmental Agreement for state taxes. The key points from the BCTR’s submission are listed below.
Improve consultation – The BCTR believes that new taxation policy could often benefit from earlier consultation at all stages of development, even at the conceptual stage before the Government announces proposed changes to the tax system. The BCTR also believes that consultation could be improved at the detailed policy formulation level. This would greatly reduce the subsequent consultation times on draft legislation, once it is completed. An improved consultation process would also contribute to developing legislation that is simple, clear, more certain and easier to comply with and would instil a greater level of faith in taxpayers that the tax system achieves its policy intent.
Increase transparency – The potential revenue impact of proposed taxation measures should be disclosed in a more transparent and consistent way to enable fuller and more effective consultation.
Inspector-General of Taxation should stay – It is Treasury’s role to establish tax policy and the Australian Tax Office’s (ATO’s) role to administer the law. However, at times, the ATO strays into the area of policy formulation. For this reason, the BCTR strongly disagrees with Labor’s policy to abolish the role of Inspector-General of Taxation.
Adequate funding for tax policy development – Policy initiatives that require legislative amendment often take too long to be implemented after an announcement, sometimes leaving both the ATO and taxpayers in limbo. The Government should provide adequate drafting and other resources to the policy development and implementation process.
Confidential communications with tax advisors – The BCTR supports a form of statutory privilege to protect the confidentiality of the communications between suitably qualified and regulated non-legal tax advisors and their clients. Such a statutory privilege should encourage clients to openly share information with their advisors, and should promote full and frank disclosure of information to their accountants.
Reduce corporate tax burden – Measures that can be taken to reduce the corporate tax burden include:
Addressing the bias against taxed foreign income;
More favourable amortisation of acquired intangible assets;
Improvements to company loss usage rules;
Restoring the 150 per cent concessional deduction for R&D expenditure;
20-year effective life cap for all depreciating assets other than buildings; and
Providing CGT taper relief for business assets held for the medium to long-term.
The BCTR believes the corporate income tax burden should be reduced through either modifying the base by adopting the business taxation recommendations outlined above or reducing the corporate tax rate.
FBT and childcare – Workforce participation could be increased through changes to the FBT treatment of employer-sponsored childcare. The on-premises requirement for employer-sponsored childcare should be removed. Consideration should also be given to extending the FBT exemption to include expense payment fringe benefits.
Review of personal tax system – The BCTR released its Personal Income Tax Discussion Paper in February 2007, calling on the Federal Government to establish a comprehensive review of Australia’s personal tax system. That review should be conducted by a prominent Australian, and tasked with developing a clearly structured tax reform plan that will take Australia forward. Such a process would need to address not only costs, but also the distributional impacts of potential change.
Incentives for personal savings – Consideration should be given to additional measures that would increase both the capacity of and the incentives for Australians to save, including promoting a culture to support sensible life-time saving through improved policies to encourage children to save. Options that could be considered include further changes to the taxation of superannuation arrangements.
Employee share schemes – The BCTR has a number of concerns with the taxation treatment of employee share plans. The BCTR recommends that the law be amended to make it clear that for tax purposes, an employee acquires a share under an employee share scheme when the employee acquires the share upon the exercise of a right acquired under an employee share scheme. The law should also be amended to remove the cessation of employment as a taxing event.
The BCTR considers reform of inefficient state-based taxes to be a key element in developing an effective and competitive taxation system for Australia. With the introduction of GST in 2000, the treasurers of each state and territory agreed to abolish nine state-based taxes in exchange for additional GST revenue under the Intergovernmental Agreement (IGA). The Federal Government should continue to exert pressure on the states to:
Abolish all agreed taxes including non-residential conveyancing duty;
Bring forward the timetabled dates for abolition of each tax in line with increasing GST revenue flows; and
Establish a program of continuing reform designed to eliminate all inefficient taxes within the bounds of fiscal responsibility.
The full BCTR budget submission has been reproduced on the AICD website.
All AICD policies and submissions can be found at: www.companydirectors.com.au under ‘Policy and Advocacy’.
If you wish to provide feedback or to obtain further information, please email Rob Elliott, general manager, Policy and General Counsel at: email@example.com
FAQ of the month
One of our directors has recently resigned and we are looking for a replacement. What advice can you give us? We are a pharmaceutical company based in Sydney and are ideally looking for someone with 10 years plus experience in the pharmaceutical industry with strong technical and management expertise.
There are several ways to find a new director, but an important benefit of being a member of AICD is having access to the Director’s Register. This is a register of people wanting to be considered for director roles as they come up and may well provide you with the right candidate.
To access the Director’s Register, just access the AICD website, select member services and then Director’s Register. To request a search for a director, simply complete the online form with details of your ideal candidate including background, skills and duties to be performed. AICD will then issue you with a requisition number and begin searching for potential candidates. If the register holds any candidates matching your criteria, we will contact you within two days with a maximum of 10 matches for each research request.
Other ways of finding a suitable director are through executive search firms or professional networks.
Executive search firms are many and varied and so it would be important to ensure their experience and industry relevance matched your requirements. It would also be essential for the board to look at an array of suitable candidates in order to select the best.
However, its important to remember that the services of executive search firms are not free.
Finally professional networks have long been a source for locating suitable directors. Networks may provide some excellent candidates through knowing the backgrounds and achievements of potential candidates, but it would be important not to regard it as the only source of candidates.
A list of banned and disqualified persons under the Corporations Act can be found on the ASIC website at: www.search.asic.gov.au/ban.html. It may be advisable to search this before considering a candidate.
Further information on this topic including FAQs, books, and details of the Company Directors Course can be found at: www.companydirectors.com.au
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