A UNSW academic will tell this week's ATAX 8th international tax administration conference that Australia needs simpler small business tax laws.
The call comes from tax expert, UNSW Associate Professor Binh Tran-Nam, who is basing his comments on the results of a national survey he conducted in late 2007 to gauge Australian tax practitioners' perception of small business tax law complexity.
He says that they view the five most complex issues facing them as the frequency of tax law changes, small business capital gains tax concessions, deeming provisions such as dividends, retirement planning and taxable fringe benefits.
"Australia's small business tax law needs streamlining," says Associate Professor Tran-Nam. "An important lesson to draw from this survey is that frequent changes in tax law rules are hurting the operation of small businesses. If the ATO wants to alleviate pressure on small businesses, it should give some thought to the issues identified by tax practitioners as the five most complex issues they face."
An expert in tax compliance costs, A/Professor Tran-Nam says there is a need to assess taxpayer compliance costs before tax laws are amended and introduced. "Consulting representatives of taxpayer and tax professional organisations could significantly help to slow down or even reduce the growing complexity of small business taxation," he says.
Tax practitioners view the five least complex tax items as progressive tax rates, PAYG withholding, depreciation, PAYG instalment and negative gearing. The survey of 121 tax practitioners asked respondents to rank 35-core questions specific to small business tax law on a 5-point Likert scale. The results are independent of demographic variables and broadly consistent with findings from previous US and Australian studies.
"This study was motivated by two considerations," A/Professor Tran-Nam says: "The pivotal role played by small businesses in the Australian economy and the growing costs attributable to legal complexity and tax compliance as a result of the tax reform process in Australia. To their credit, Australian federal governments have sought to support and encourage small business, but in the quest for greater economic efficiency and social equity, Australia's tax system has grown increasingly more complex.
"However, this has adversely affected the entire private sector. Given the well-known regressive nature of tax compliance costs, the increasing complexity of tax law in Australia has had a disproportionately negative impact on the small business sector. To simplify the tax system for small businesses, it is important to first recognise the particular tax areas/issues considered to be complex by small businesses."
In 2000-01, Australia had more than 1.2 million private sector small businesses, representing 97% of all businesses. In that year, the small business sector employed 3.6 million workers, or nearly half of all private sector and contributed A$160 billion of final output, or 30% of Australia's GDP.
Download the ATAX conference program here.
Media contacts: Binh Tran-Nam, Tel +61 425 271 691 or Dan Gaffney, UNSW media office, +61 411 156 015