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Complexity - a sketch in five slides

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How did tax get so complex? In the 1950s Australia had a tax system made up of around 1080 pages of tax law.

Since then, Governments have identified gaps, addressed omissions, and attempted to adapt the tax system to changes in business and society.

Our tax system is now a complex patchwork of rules.

Published in: Government & Nonprofit
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Complexity - a sketch in five slides

  1. 1. Complexity A sketch in five slides June 2015
  2. 2. How did it get so complex? 2 In the 1950s Australia had a tax system made up of around 1080 pages of tax law. Since then, Governments have identified gaps, addressed omissions, and attempted to adapt the tax system to changes in business and society. Our tax system is now a complex patchwork of rules.
  3. 3. Layer on layer of complexity 3 As the world has become more complex, so has Australian tax law. We now have more than 14,000 pages of tax law dealing with countless specific scenarios. This has resulted from trying to deliver different policy outcomes, for different taxpayers, in different situations. Having fewer policies that apply to all taxpayers, rather than a range of different policies for different taxpayers, would help to reduce complexity. 0 2,000 4,000 6,000 8,000 10,000 12,000 14,000 16,000 1951 1962 1971 1973 1980 1983 1994 1997 1998 1999 2000 2001 2002 2003 2005 2006 2007 2008 2010 2011 2012 2013 2014 2015 Pages Year
  4. 4. 4 • More complexity means higher compliance costs; that is, the time and money the community spends complying with tax obligations. • The most recent estimate places the compliance costs associated with taxes the ATO administers in the order of $40 billion each year.1 • Small business in particular bears the burden of compliance costs associated with a complex system. The knock-on effect of complexity 1. as reported in Australian Government, Re:think Tax Discussion Paper March 2015 (2015); see also Australian Government, The Treasury, Stocktake of Regulation Final Report March 2015 (2015).
  5. 5. • 12.8 million Australians lodged personal tax returns. • 73.5% of these used a tax agent or accountant. • The average cost of managing tax affairs was $370 per person - a total cost of more than $3 billion. • 8.3 million had “simple tax affairs.”1 • But 5.4 million of these still used a tax agent or accountant. 1 Simple tax affairs - includes anyone without any: net rental income, capital gains, business income, trust income or income from certain overseas entities. Individual impact: a 2012-13 snapshot
  6. 6. And for business, Australian tax, is not as easy as… 6 Ease of paying taxes 2015 World Bank/PWC Rank Hong Kong 4 Singapore 5 Canada 9 Denmark 12 Norway 15 United Kingdom 16 South Africa 19 Finland 21 New Zealand 22 Malta 26 Chile 29 Malaysia 32 Sweden 35 Australia 39 United States 47 World Bank Group & PricewaterhouseCoopers, Paying Taxes 2015 (2015) pp 152-154.

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