Thu, 15th May 2008

Labor decisions are undermining confidence in the tax system

Michael Keenan MP
Shadow Assistant Treasurer, Superannuation and Corporate Governance

Test Case Funding Review Panel - Scrapped by Labor

ATO Private Rulings at no charge - Scrapped by Labor

Family Trust election amendments – Scrapped by Labor

Shadow Assistant Treasurer Michael Keenan MP is today saying effective and efficient tax administration and compliance are being shackled by Rudd Government decisions.

Test Case Funding

In 2006, the Inspector General of Taxation recommended that new arrangements be established for the management of the Australian Taxation Office's (ATO) test case funding program.

In response, the Coalition government set up a four-member panel, comprising officials and a Melbourne tax barrister, to review decisions by the ATO refusing test case funding.

The Assistant Treasurer has now announced that this review panel will be wound up.

Mr Keenan said: “Contrary to the Inspector General’s findings, the Assistant Treasurer thinks that unsuccessful applicants will be better served by having the ATO review their unsuccessful funding applications.

“This is a regrettable step and will not instil confidence in the test case funding program.”

Private Rulings on Valuations

This week’s Budget announced that taxpayers will have to pay for private binding rulings sought in relation to valuations.

The Coalition government proceeded with reforms to the rulings system, following the report commissioned on the Review of Self Assessment (ROSA), including provision for private rulings on questions of fact, such as valuations. The Coalition affirmed the general principle that there should be no charge by the ATO for private rulings.

Mr Keenan said: “The Rudd Government is shifting costs that the ATO should rightly absorb, directly onto taxpayers who apply for a private ruling that involves a valuation.

“The Coalition government would have allowed the ATO to charge for a valuation they obtain, only where the taxpayer's application for a private ruling was not supported by a valuation from a member of an approved professional association.”

Family Trusts

This Government claims to be concerned about compliance costs and simplification of the tax system. And yet, in one of their first tests, Labor has burdened taxpayers and their advisers by turning back the clock.

Labor is once again showing its true colours by changing legislation concerning Family Trusts – putting the burden back on small business, farmers and professionals.

After extensive consultation, the Coalition government introduced amendments in 2007 that updated the definition of 'family' to include lineal descendants, former spouses and widows among others, and allowed family trust elections to be varied or revoked in some circumstances.

The Coalition’s amendments, at a cost of $8m per annum, received broad support from stakeholders.

The Rudd Government claims the amendments are an example of “lax fiscal discipline” – and yet its actions are more examples of flagrant hypocrisy.

Labor's National Platform claims it will “ensure that the taxation system minimises compliance and collection costs”.

Reversing the Coalition's amendments will increase, not minimise, the compliance burden on small business, farmers and professionals, who use family trusts for legitimate purposes, including asset protection.

Mr Keenan said: “An amendment made by the Coalition government only last year in relation to the family trust election rules is about to be reversed.

“And worse, the Rudd Government is changing the legislation retrospectively.

“How can taxpayers and tax agents have confidence in a tax system that is subject to retrospective amendments?”