House Tax Committee submits report into Tax Expenditures Statement

The House Tax Committee has submitted its report into the Tax Expenditures Statement on Thursday. According to the Committee, the Statement achieves its goals of facilitating scrutiny of tax expenditures and informing the tax debate.

At the same time, the Committee has made recommendations so that the Statement can be improved. The suggestions include consulting more with stakeholders, developing a way to aggregate all expenditures and conducting prioritised reviews of tax expenditures. The Committee suggests that Treasury should longer term estimates where a tax expenditure is expected to vary beyond the forward estimates in the budget.

“The Statement is held in high regard internationally and it is an integral part of budget transparency,” Committee Chair Bert van Manen said in a media release. “Although there are opportunities for improvement, I commend Treasury on producing a document of such high quality given the technical complexity.”

The Committee said the current approach to handle superannuation tax concessions should be stay, which means the “income tax benchmark” is going to be used. The Committee further recommends that the capital gains exemption for a main residence should be included in the Statement’s benchmarks.

This is supposed to show that principal residences constitute the majority of the tax base, and that the tax concession is unlikely to be revoked. The Committee refers to New South Wales which takes a similar approach in its Statement in relation to land tax.

According to international comparisons by the World Bank in 2010, Australia ranked 11^th among 120 and became one of the smallest “shadow economies” the world. However, the Australian Bureau of Statistics estimated in 2013 that the size of the "non-observed economy" was at about 1.5 per cent of Gross Domestic Product.

The Australian Tax Office found the proportion unacceptable.

"The ATO's approach is to protect honest businesses which face unfair competition by others operating in the cash economy,” The Sydney Morning Herald quoted an ATO spokesperson. “Omitted income from the cash and hidden economy is a challenge for every economy and the real damage is to honest businesses trying to do the right thing."

Contact the writer at feedback@ibtimes.com.au, or let us know what you think below.