The debt levy, paid parental leave scheme levy and a policy of allowing states to levy income tax are examples of measures that would have a significant impact on the incentive for taxpayers to avoid their tax obligations, according to a statement from William Buck.
“By world standards, Australians are relatively good with their tax compliance,” William Buck tax director Greg Travers said.
“But high compliance costs, complexity and perceived inequity in the tax system serve to encourage higher levels of tax avoidance,” Mr Travers said.
“Some of the proposed measures are a direct response to revenue pressures in the budget, but if the measures also result in greater tax avoidance, this will only add to the existing revenue pressures.
“That is not the route we want to see the government go down.”
The debt levy and the paid parental leave scheme levy will increase the discrepancy between the corporate tax rate and the highest marginal tax rate for individuals.
The company tax rate is proposed to be cut to 28.5 per cent from 1 July 2015 for businesses that do not pay the paid parental leave scheme levy.
The highest marginal tax rate for individuals will increase to 48 per cent with the introduction of the debt levy.
“The differential is 19.5 per cent, up from the current 16.5 per cent,” Mr Travers said.
“People perceive this arbitrage as inequitable.
“The differential is significant and I expect we will see taxpayers trying to take advantage of it – legitimately and illegitimately.”
Mr Travers said a simpler, more consistent tax system is needed to minimise the opportunity and incentive for tax avoidance.
“In our experience, the more complex a tax system is, the greater the opportunity and incentive for tax avoidance,” he said.
“Higher levels of avoidance inevitably lead to more integrity measures in the tax laws which in turn add to compliance costs and shift a greater portion of the tax burden to those taxpayers who are trying to comply with the law.”
