13/12/2005 - 21:00

Tax compliance costs irk

13/12/2005 - 21:00


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The cost of complying with the state tax system has increased during the past five years, a business survey has found.

The cost of complying with the state tax system has increased during the past five years, a business survey has found.

More than half of the survey respondents say state tax laws are not relevant to the commercial environment and are not fair, with more than a third saying the laws are not transparent or understandable.

The strongest finding was that 79 per cent of respondents have higher compliance costs compared with five years ago, despite the abolition of several “nuisance” taxes.

While a majority said compliance costs equated to less than 5 per cent of state taxes paid, 37 per cent said these costs were greater than 5 per cent.

The survey by the Institute of Chartered Accountants coincided with the Gallop government’s major review of the state tax system.

It found opinions were divided about the performance of the Office of State Revenue, which administers state taxes.

Most respondents said it was courteous, direct and unambig-uous, professional and transparent.

However, 41 per cent of respondents said the OSR did not have the necessary industry knowledge and 36 per cent do not believe its audits are conducted in a timely manner.

Institute general manager WA, Con Abbott, said the findings, based on responses from 82 business people, indicated a need for change within the OSR and with state tax laws.

The institute recommended that an independent review should assess the adequacy of the OSR’s resources and the skills of its staff.

It also recommended that the OSR develop specialist units aligned to major industry sectors.

In terms of compliance, the main concerns were onerous record-keeping requirements and unreasonable submissions times. It was suggested these should be based on working days, not calendar days.

It was also suggested that rental business duty should be dropped, as it collects very little revenue (an estimated $28 million in 2005-06) but has high compliance costs.

Rental duty has been the subject of a concerted campaign by video rental stores across WA, which believe they are unfairly disadvantaged.

In a submission to the state tax review, Blockbuster Albany principal and industry representative Brett Mosel said rental duty was unfair because competitors, such as online rental firms and ‘corner stores’, were not subject to the tax.

“We now have multiple suppliers offering the same service and product as us, on an even time frame, at an even or sometimes lower cost to their business than we can achieve, without having to pay this tax,’ Mr Mosel said.

The federal government submission to the state tax review said rental duty was one of three state taxes that should be abolished, pursuant to an agreement on sharing of GST revenue.

The Chamber of Commerce and Industry WA agrees that abolition of the three forms of stamp duty should be at the top of the government’s priorities.

The CCI also wants the rate of payroll tax to be reduced over a period of time from 5.5 per cent to 4.75 per cent.

Its submission was informed by a survey of its members, which found the level of taxation was their top priority, followed by the complexity of the tax system.

Tax administration and tax compliance ranked lower as issues.

State Treasurer Eric Ripper has indicated there is potential for tax cuts following the current review but has been non-committal about the timing or nature of any cuts.

The scope for tax cuts was highlighted by data released this week showing an operating surplus of $518 million for the first three months of the financial year.

Mr Ripper said while the government was on track to deliver a sixth budget surplus, caution should be exercised in extrapolating the likely outcome for the year on the basis of the quarterly result.

Mr Abbott said the state government should wait for the results of its tax review before committing to any tax cuts.


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