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The Henry Review

Editor: The press release on the following page was issued by the NTAA in response to a number of newspaper articles that appeared around the country on the 21st of October.

We were particularly annoyed because of the underhanded nature of the leak and the quite obvious political agenda that underscores it.

As an association representing tax agents, no doubt our critics will try to drown our arguments and discredit us with "cheap shot" claims that we are merely trying to protect tax agents' "meal tickets".

Nothing could be further from the truth. Tax agents are taxpayers too. They have an interest in the proper workings of the tax system. The NTAA is, however, concerned with the apparent attempt to "marginalise" tax agents.

Neither the tax system nor tax agents are the problem. Blaming the tax system is akin to blaming building regulations when building a house. They are there to ensure the house is built safely and doesn't fall down. The tax system is complex and robust. There is a delicate balance to achieve between simplicity and maintaining integrity and fairness for all Australians through the welfare system. We make no apologies about this. It is a function of the sophisticated and world leading economy and egalitarian attitude that we as Australians are fortunate enough to possess and enjoy.

The NTAA is all for simplification and streamlining of the tax system, but not at all costs. The interests of taxpayers and the country are paramount, and the NTAA will not be blindly supporting any proposal it does not agree with.

Some of the issues that need to be answered (including the rumoured $500 deduction to be allowed to those using the one page return) include:

• How does the $500 compare to the average level of claims currently made by affected taxpayers?
• What safeguards will be put in place to ensure the $500 is not reduced or simply removed.
• How can we trust any safeguards (even if there were any)?
• What happens to taxpayers who opt in but their circumstances change and they don't know they no longer qualify under the proposal?
• And why should we do this when the former Tax Commissioner believed that the "I" return is a "valid social document" that has many benefits apart from collecting tax?
• What is also overlooked as a consequence of taxpayers not lodging full tax returns is a potential "leakage" of those taxpayers from the full regulation of the Australian tax system, undermining its integrity.
• Australia has currently a very high "compliance" record in respect to taxation matters, this change would surely weaken the basic system.
• What is the experience of other countries with comparable economies as to the impact on the integrity of the tax system?
• Access to much of Australia's welfare benefits is facilitated through the 'I' return which "traps" information to determine a person's eligibility to a raft of benefits. How will the "simplification" impact on the fairness of the welfare system, including maintaining the targeting of benefits through means testing to those who need it most?

Press Release

Is Dr Henry's "End-game" the abolition of tax refunds?

The NTAA fully supports measures designed to simplify the tax system for the benefit of Australian taxpayers, as are its members. We are just not convinced that those aspects of the Henry proposal that have been leaked will do this.

We are also concerned that, rather than having an open and robust public discussion, the Henry Review of the taxation system seems to have entered the phase of softening up the Australian taxpayer. It's an old tactic. Leak a part of the story, wait for a response then pounce. Dr Henry has already started flexing his muscles by saying that he is fully prepared for "scare campaigns".

So, presumably, any unfavourable response will be labelled a scare campaign. A little harsh given the fact that he has chosen to only release a tidbit and not release the whole document.

That said, the Henry proposal, to be released in December, is expected to recommend that taxpayers will receive a one-page summary "income tax return" which will include a "standard" deduction for work related expenses.

Taxpayers will be able to 'tick' a 1 page document issued by the ATO and sit back and wait for their refund.

The refund will be based on a 'standard' deduction for work related expenses and a figure of $500 has been floated.

Now taxpayers have a right to be scared!

Nick Connell, spokesman for the NTAA, said that "Treasury has for years been concerned at the blow-out in work-related deductions and we believe that the concept of a 'standard' deduction may well be the first step in controlling deductions for work-related expenditure.

"We are concerned, and we believe justifiably concerned, that if taxpayers allow their claims for work-related expenses to be "standardised" in any form at all, that they may end up losing them.

"Millions of taxpayers are entitled to legitimately claim hundreds or thousands of dollars in deductions that they incur in earning their income.

"This right is written into the law."

"Most of us make claims for car expenses, travel and accommodation, home office, uniform, protective clothing, laundry, telephone, computer, power, etc. The list goes on."

"How long will these claims last," he asked, "once we allow them to be standardised?"

Is the end-game the abolition of tax refunds?

"Australians love their income tax refunds. They rely on them as a, sort of, forced way of saving. They are an institution and it is our right to be able to claim work-related deductions and receive income tax refunds.

"We urge taxpayers to not allow the government to standardise deductions that they are legally entitled to. Make no mistake about it. Let them get their foot in the door and the refunds we love to get will one day be wiped out."

Leaking a tidbit from the proposals raises more questions than answers and the NTAA calls on Dr Henry to have an open dialogue with the Australian people and not seemingly engage in a surreptitious campaign to gauge public reaction.

Editor: Thanks Yasser. Good work!