This week The Tax Institute finalised its submission on the Government's draft changes to the Part IVA general anti-avoidance law.
We support the maintenance of integrity rules within the tax system to ensure that tax is levied fairly, consistently and according to the policy intention of the relevant tax laws. Widespread faith in the integrity of our tax laws is essential to securing taxpayer trust and voluntary compliance.
Part IVA plays a particularly significant role in safeguarding the integrity of the tax system, ensuring compliance with the intention, not just the letter of the tax law. As such, Part IVA should only be applicable in circumstances where the relevant taxpayer has acted in a blatant, artificial or contrived manner in order to pay less tax than would have been the case had tax been appropriately levied on the substance (rather than the form) of the transaction.
The Government's proposed amendments are unnecessarily extensive, place undue and inappropriate reliance on the purpose inquiry and are based on incorrect assumptions about the likely findings of the Courts in circumstances where the 'do nothing' counterfactual may have been put by taxpayers in other circumstances.
The amendments are complex and have caused much confusion and debate as to their actual and intended effects. The scope, breadth and effect of these amendments will require much litigation to resolve.
Nevertheless, if the Government proceeds with changes, we propose a narrower amendment that is restricted to only those changes considered necessary to address the perceived integrity concerns.
Finally I would like to wish all members a Merry Christmas and a Happy New Year. We will be back in the first week of 2013.
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.