Last week saw the Government and Opposition trade blows on leaked Treasury costings, bringing into sharp focus the question that has dominated tax policy discussions for years: how much do proposals really cost?
With the forecast of a wafer thin Budget surplus this year, the cost of tax measures has played an increasingly central role in policy decision making. The importance of costing measures appropriately cannot be understated - everyone involved in developing tax policy has been forced to deal with the consequences of significant changes in actual versus projected costs of tax measures.
The current Treasury costings process is thorough, but it is understandably limited by the nature and availability of data. In an economy undergoing significant structural changes, data may be significantly out of date by the time it is used to cost a proposed measure. This combined with the use of the four year forward estimates period may not allow the full impact of each measure to be properly considered.
The Tax Institute recently wrote to the Assistant Treasurer, The Hon. David Bradbury MP, advocating greater private sector input into the Treasury costings process to ensure that commercial insight and understanding is taken into account in addition to historical data. We will also continue to engage in ongoing dialogue with Treasury in relation to the same.
Ultimately, the best decisions are made with the most accurate information to hand and Tax Institute members are best placed to play a significant role in ensuring this occurs.
Robert Jeremenko CTA is Senior Tax Counsel of The Tax Institute.
The Tax Institute is Australia’s leading professional association in tax. Its 13,000 members include tax agents, accountants and lawyers as well as tax practitioners in corporations, government and academia.