Richardson, Grant; Smith, David --- "The Readability of Australia's Goods and Services Tax Legislation: An Empirical Investigation" [2002] FedLawRw 17; (2002) 30(3) Federal Law Review 475

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It can be seen then, that Dale and Chall identified three aspects of the reading process: comprehension, fluency (reading speed), and interest.^[23] We submitt here that both comprehension and fluency are important considerations in the readability of taxation law; though perhaps 'interest' is less so. For this reason, a definition or measure of readability which does not focus on reader interest may be considered more appropriate in this particular circumstance.

In keeping with this expostulation, and in order to be consistent with Smith and Richardson,^[24] the Flesch Readability Index (or Flesch Reading Ease Index) is used in this study to measure the nature of readability. Flesch also acknowledged the importance of reader interest in any analysis of readability and, as a consequence, developed the Flesch Human Interest Index.^[25] The Human Interest Index has been largely ignored in subsequent research and is therefore not utilized here.

As Tan and Tower have suggested, there appears to be general agreement in the taxation literature that a low level of readability is one of the most important factors involved in taxation complexity.^[26] Cooper has identified 'clarity of expression' as being one of the most important issues referred to by taxation commentators when discussing the simplicity (or complexity) of a taxation system.^[27] It is assumed, therefore, that readability (which emphasises comprehension and fluency) is an important consideration in attempts to simplify, and thereby improve, taxation law, with perhaps the other main consideration being simplification of taxation policy.

IV RESEARCH METHODOLOGY

The use of readability formulae is the most commonly used method in contemporary research for assessing readability.^[28] Moreover, the use of readability statistics to measure simplicity of the wording of taxation legislation is supported by its prior use in taxation research.^[29] Readability indices are said to 'take into account characteristics of writing style that are measurable and then evaluate the extent to which each identifiable attribute impacts on reading difficulty.'^[30]

Readability statistics do not necessarily consider conceptual difficulty, semantics, reader characteristics and presentation of the material (such as font size, layout of text, graphics and tables). Consequently, they cannot result in an absolute measure of clarity.^[31] However, prior research has shown that readability indices can be used to assist in predicting the readability of business and legal documents. Indeed, the United States Internal Revenue Service has used the Flesch Readability Index to measure the readability of taxation forms and instruction booklets many times in the past.^[32]

There is also a plentiful amount of research in the accounting literature: at least 25 studies over the past 40 years (including some in Australia, Canada, Hong Kong, the United Kingdom and the United States) that have investigated the readability of narratives in company annual financial reports. The Flesch Readability Index was the dominant choice of researchers as the measure of readability in these studies.^[33]

Specifically, the Flesch Readability Index gives written documents a reading ease score from 0 (most difficult to read) to 100 (easiest to read).^[34] A score of between 60 to 70 is considered to be acceptable. Furthermore, the Flesch Readability Index is the most widely used readability formula outside education circles.^[35] It has been extensively validated in the past and found to be highly reliable.^[36] Finally, studies have also shown high statistical correlations between Flesch formula scores, and scores obtained using other readability indices.^[37] The index is calculated using the following formula:

This calculation can be undertaken using a computer program (for example, Microsoft Word 97). According to Harrison, computers are usually quite accurate in counting syllables, with the few errors made tending to be in either direction, thus cancelling each other out.^[38] By comparison, human calculation has been shown to lead to highly unreliable results. Nevertheless, Richardson and Sawyer have noted that some computer programs appear to have difficulty in processing large sentences.^[39] To this end, large sentences were checked manually in this study and results were adjusted if they were found to be inappropriate.^[40]

Given the size of the current study and the fact that computer calculation has been demonstrated to be considerably more accurate than human calculation, a computer program (viz. Microsoft Word 97) was used. Owing to the large number of the GST sections analysed, it was felt that the possibility of error affecting the results would be insignificant. In keeping with Harrison's assertion,^[41] it was assumed that such errors were likely to cancel out across the entire sample. Furthermore, many annual report readability studies published in reputable accounting journals have used computer programs to calculate Flesch scores.^[42]

Consistent with the research methodology applied by Tan and Tower,^[43] Richardson and Sawyer,^[44] Woellner et al^[45] and Smith and Richardson,^[46] the current study uses the Flesch Readability Index to measure the simplicity of a random sample of sections from the GST Act. These results are then compared to results obtained by Smith and Richardson who applied a similar methodology to ITAA36 and ITAA97.^[47]

The sample framework excluded sections from the GST Act of less than fifty words in keeping with Harrison's assertion that fifty words is generally taken to be a length below which text samples are considered inappropriate for analysis.^[48] Moreover, in keeping with Smith and Richardson,^[49] this study also employs the Flesch-Kincaid Grade Level (F-KGL) Index to measure reliability.^[50] The F-KGL Index rates text on a US grade school level and the formula is expressed as follows:

While the authors acknowledge that this test is not ideal for testing the readability of taxation legislation, it does provide some further information about a text's readability and has therefore also been applied in this study. A score of eight on this test indicates that an eighth-grade US student can understand the document. Grade level indices such as the F-KGL Index have been demonstrated to be accurate to plus or minus one grade level.^[51]

V RESULTS AND DISCUSSION

As was previously mentioned in Section III, a document needs to achieve a score of between 60 and 70 (or better) on the Flesch Readability Index in order to be said to be sufficiently readable. The average Flesch scores shown in Table 1^[52] below indicate that the sections of the GST Act analysed have an average Flesch score of 40.3. This finding indicates low readability for the GST Act.

Table 1

Summary of the Readability of Australia's Tax Legislation

Certain fundamental divisions and sections of the GST legislation stand out as worthy of special mention. For example, Division 2 of the GST legislation, which provides an overview of the GST legislation, has a division average of 59.8 (see Appendix) which, when rounded to the nearest whole number, meets an acceptable level of readability.

Important areas of the GST legislation are those that deal with compliance requirements, such as Divisions 31, 33 and 35, which deal with GST returns, payments of GST and GST refunds. These divisions had average Flesch scores of 35.8, 41.3, and 31.1 respectively (see Appendix). These scores all fall well below the acceptable benchmark range of 60 to 70. This indicates that these key divisions of the GST legislation are very difficult to read and understand.

Another important area of the GST legislation is Division 40 that deals with input taxed supplies. In particular, Sub-division 40A, which encompasses financial supplies, had a Flesch score of 46.9 (see Appendix). This score falls well below the acceptable benchmark range of 60 to 70 and demonstrates that this important Sub-division of the GST legislation is very complex in nature; a finding that is consistent with recent taxation literature dealing with this subject.^[53]

In their analysis of the readability of ITAA97, Smith and Richardson singled out Chapter 6 of ITAA97, viz. the Dictionary, as being worthy of special mention, since '[I]t would be expected that taxation legislation defining particular terms for taxpayers and therefore, in a sense, underpinning the entire Act should fittingly, score high on readability'.^[54] Smith and Richardson found a Flesch score for the ITAA97 Dictionary of just 29.9.^[55] Applying the same test to the Dictionary of the GST legislation revealed a very similar result, with a Flesch score of 30.3 being obtained (see Appendix). Given Smith and Richardson's suggestion that it is very important for taxpayers to be able to understand key terminology,^[56] these appear to be unsatisfactory results.

The results of this study purvey an interesting comparison with those obtained by Smith and Richardson concerning ITAA36 and ITAA97.^[57] This particular study investigated the readability of 95 sections from ITAA97 and the sections from ITAA36 that they replaced, and obtained an average Flesch score of 46.42 for ITAA97, and 38.44 for ITAA36. The results of this study concerning the GST suggest that, on average, the GST legislation is less readable than ITAA97. Nevertheless, the results for all three pieces of taxation legislation fall well below acceptable readability benchmarks.

Results obtained from using the Flesch-Kincaid Grade Level Index to measure readability provide a similar outcome.^[58] The average F-KGL Index obtained for the GST legislation was 11.0 compared to 10.76 for ITAA97 and 10.79 for ITAA36 (see Table 1).^[59] When these results are rounded to the nearest grade level, obviously, they are the same. Furthermore, an F-KGL Index of 11 (out of a maximum result of 12) provides additional evidence of the low readability of the GST legislation.

Of major concern is the number of GST sections that recorded the maximum possible F-KGL Index score of 12 (see Appendix). In particular, 205 sections out of 352 (viz. 58.2%) achieved the maximum F-KGL Index score of 12, indicating low readability for these GST sections. Indeed, the average F-KGL Index scores may have been even higher if the scale had extended beyond the threshold of 12.

A further important issue that should be considered with respect to the readability of the GST legislation is the use of passive sentences, notwithstanding that they are not directly incorporated in the readability formulae. Specifically, Table 1 shows that the use of passive sentences in the GST legislation is slightly lower than in ITAA97 (viz. an average of 20% in the GST legislation vis-à-vis 20.81% in ITAA97). It should be noted that on the basis of these results at least, the use of passive sentences in both the GST legislation and ITAA97 is not of a level that should be considered excessive.

The number of words per sentence can also affect readability of text. Of the GST sections analysed, average words per sentence (WPS) in the GST legislation was 20.9. This compares favourably with the results obtained by Smith and Richardson of 22.27 for ITAA97, and 39.02 in ITAA36 (see Table 1).^[60] Although the number of words per sentence is incorporated into the readability formulae, it is advantageous to isolate in order to provide additional information about a text's readability. Clearly, a reduction in WPS is desirable, as it can serve to improve readability.^[61]

A summary table of Flesch readability scores based on similar tables provided in Tan and Tower,^[62] Richardson and Sawyer^[63] and Smith and Richardson^[64] is presented below in Table 2. Table 2 categorises each section according to its Flesch score.

Table 2

Summary of Flesch Readability Scores

* The grade levels referred to are New Zealand grade levels, which generally correspond to Australian grade levels.

As can be gleaned from examining Table 2, the number of GST sections found to have Flesch scores under 30 was 91 (or 25.85%) of the total sample. Moreover, another 46.31% of the GST sections analysed had Flesch scores between 30 and 50. Consequently, Table 2 shows that 72.16% of the sections in the GST legislation can be regarded as difficult or very difficult to read, as a university education is required in order to understand these GST sections. In fact, only 11.93% of sections in the GST legislation met the acceptable readability benchmark of 60 or above and a Form 4 or lower level of formal education. These results show that the vast majority of the GST legislation is too complex to be understood by the average Australian taxpayer.

VI CONCLUSION

While the introduction of the GST in Australia did not fall under the auspices of the TLIP, it could be argued that efforts made to simplify any form of taxation legislation, including the GST, could be considered to be a desirable means of helping to reduce business taxpayer compliance costs.^[65] Therefore, the primary objective of this study was to test empirically the readability of the GST legislation in Australia.

This objective was accomplished by using empirical measures of the level of readability to operationalize Adam Smith's maxim of simplicity.^[66] A copious sample of sections was taken from the GST legislation and was subsequently tested empirically for readability levels using the Flesch Readability Index and the Flesch-Kincaid Grade Level Index. In addition, the samples were also analysed according to the use of passive sentences and average words per sentence.

According to the Flesch Readability Index, it was found that the sample sections of the GST legislation had an average Flesch score of 40.3. As this score falls well below the acceptable benchmark range of 60 to 70, this indicates that the GST legislation is in general, very difficult to read and understand. Moreover, more than 70% of the GST sections analysed had Flesch scores that show that they can only be read and understood by those persons who have at least reached a university level of education.

Results obtained from using the F-KGL Index when applied to the GST legislation were also found to be disappointing. The average F-KGL Index obtained for the GST legislation was 11.0. Moreover, an F-KGL Index of 11 (out of a maximum result of 12) provides further evidence of the low readability of the GST legislation. Of major concern was the number of the sections analysed that recorded the maximum possible F-KGL Index score of 12: viz. 205 sections out of 385 (or 58.2%). Indeed, the average F-KGL Index scores may have been higher if the scale had been extended beyond its upper bound of 12.

The use of passive sentences in the GST legislation was also considered as an important part of the study. The results indicated that the use of passive sentences was on average 20% in the GST legislation (see Table 1). However, the use of passive sentences in the GST legislation is not at a level that should be considered inordinate.

The number of words per sentence in the GST legislation was also investigated in the study. The average words per sentence in the GST legislation was found to be 20.9. Even though the number of words per sentence is incorporated into the readability formulae, it is useful to isolate this in order to supply additional information regarding a text's readability. Certainly, a reduction in WPS is desirable, as it can serve to improve readability.

The results of this study furnish a serviceable comparison with those obtained by Smith and Richardson concerning the readability of ITAA36 and ITAA97.^[67] Specifically, Smith and Richardson analysed the readability of 95 sections from ITAA97 and the sections from ITAA36 that they replaced and obtained an average Flesch score of 46.42 for ITAA97 and 38.44 for ITAA36 (see Table 1).^[68] The results of this study concerning the GST suggest that, on average, the GST legislation is less readable than ITAA97. However, the results for all three pieces of taxation legislation fall well below acceptable readability benchmarks.

Results obtained from using the Flesch-Kincaid Grade Level Index to measure readability provided a similar outcome. In particular, the average F-KGL Index obtained for the GST legislation was 11.0 vis-à-vis 10.76 for ITAA97 and 10.79 for ITAA36 (see Table 1). When these results are rounded to the nearest grade level, clearly, they are identical. Also, an F-KGL Index of 11 provides further evidence of the low readability of the GST legislation.

In addition, the use of passive sentences in the GST legislation is slightly lower than in ITAA97 (an average of 20% for the GST legislation vis-à-vis 20.81% in ITAA97) (see Table 1). Finally, the GST sections analysed showed that the average words per sentence was 20.9. This compares fairly well with the results achieved by Smith and Richardson of 22.27 for ITAA97 and 39.02 in ITAA36 (see Table 1).^[69]

The study's overall finding that the GST Act is very difficult to read and understand confirms Cooper and Vann's erstwhile proposition that 'the GST is not inherently simple, in contrast to the inherently complex income tax'.^[70] Likewise, when a general comparison is made to the readability of the ITAA97, it appears that the GST legislation is less readable. This finding could have implications for business taxpayers in the form of potentially higher GST compliance costs.^[71] Nevertheless, it should be remembered that simplification of taxation law (including the GST) is multifaceted in nature.^[72] Hence, improving the readability of the text contained in GST legislation is merely one important aspect of enhancing simplicity in the taxation system.

We acknowledge the concerns held by those who believe that the readability formulae, such as the Flesch Readability Index and the F-KGL Index, may over-simplify research into readability of taxation documents. As suggested earlier, as readability formulae do not take into account, among other things, conceptual difficulty, semantics, reader characteristics and presentation of materials, they cannot provide a faultless measure of clarity.

However, future researchers in this area could utilise sophisticated psycholinguistic and/or sociolinguistic techniques such as Cloze Analysis, Multidimensional Scaling, Association Analysis and Classification Analysis^[73] in combination with more fundamental readability formula approaches to provide further support for their empirical results. Future research could also be directed at replicating the present study's research design with respect to the many and varied GSTR Rulings that have been issued by the ATO as an aftermath to the introduction of the GST.

Appendix—Readability of the GST Legislation

Division—Section	Flesch	F-KGL	PS	WPS
			(%)	(av.)

Chapter 1—Introduction

Part 1–1—Preliminary

Division 1—Preliminary
1–1	75.1	7.0	0	17.0
1–2	54.7	7.3	0	7.0
Division average	64.9	7.2	0	12.0

Part 1–2—Using this Act

Division 2—Overview of the GST legislation
2–1	58.4	9.0	0	16.0
2–5	95.6	2.6	100	11.0
2–10	71.7	6.7	0	14.0
2–15	66.8	8.5	0	18.5
2–20	31.5	10.3	0	6.0
2–25	74.0	7.6	50	19.0
2–30	17.7	12.0	0	26.0
Division average	59.4	8.1	21	15.8

Division 3—Defined terms
3–1	54.8	10.0	66	17.6
3–5	41.8	11.0	100	14.5
3–10	34.1	11.2	100	11.0
Division average	43.6	10.7	89	14.4

Division 4—Status of Guides and other non-operative material
4–1	30.0	12.0	0	20.0
4–5	28.0	12.0	20	12.2
4–10	58.1	8.2	33	12.6
Division average	38.7	10.7	18	14.9

Chapter 2—The basic rules

Division 5—Introduction
5–1	99.2	1.7	0	9.5
5–5	55.4	10.1	0	18.5
Division average	77.3	5.9	0	14.0

Part 2–1—The central provisions

Division 7—The central provisions
7–1	0.0	12.0	0	9.7
7–5	57.6	10.6	50	22.0
7–10	47.3	8.8	0	9.0
7–15	50.6	11.0	0	19.6
Division average	38.9	10.6	13	15.1

Part 2–2—Supplies and acquisitions

Division 9—Taxable supplies
9–1	62.7	7.9	0	14.0
Subdiv 9–A—What are taxable supplies?
9–5	66.7	7.1	0	13.0
9–10	46.1	11.8	33	20.3
9–15	34.7	12.0	20	30.6
9–20	37.1	12.0	0	28.8
9–25	49.1	10.8	50	18.0
9–30	52.1	12.0	66	25.5
Subdiv average	47.6	11.0	28	22.7
Subdiv 9–B—Who is liable for GST on taxable supplies?
9–40	69.9	6.7	0	13.0
Subdiv 9–C—How much GST is payable on taxable supplies?
9–70	60.1	9.0	0	17.0
9–75	38.7	12.0	0	22.2
9–80	42.8	12.0	0	28.5
9–85	30.4	12.0	100	34.0
9–90	64.0	8.7	0	17.7
9–99	66.4	5.2	0	5.0
Subdiv average	50.4	9.8	17	20.7
Division average	51.5	9.9	19	20.5

Division 11—Creditable acquisitions
11–1	37.1	12.0	0	18.5
11–5	30.5	10.7	0	7.0
11–10	40.2	11.8	33	17.0
11–15	50.8	11.0	40	19.8
11–20	27.6	12.0	0	13.0
11–25	39.7	12.0	33	18.0
11–30	30.5	12.0	16	31.3
11–99	42.4	8.4	0	4.5
Division average	37.4	11.2	15	16.1

Part 2–3—Importations

Division 13—Taxable importations
13–1	47.5	11.0	0	18.0
13–5	30.9	12.0	0	13.8
13–10	89.8	5.1	0	18.0
13–15	38.0	10.6	0	11.0
13–20	37.4	12.0	0	20.0
13–25	17.5	12.0	0	39.0
Division average	43.5	10.5	0	20.0

Division 15—Creditable importations
15–1	37.1	12.0	0	18.5
15–5	24.5	11.4	0	6.5
15–10	50.8	11.0	40	19.8
15–15	27.6	12.0	0	13.0
15–20	33.1	12.0	33	16.3
15–25	40.7	12.0	25	27.7
Division average	35.6	11.7	16	17.0

Part 2-4—Net amounts and adjustments

Division 17—Net amounts and adjustments
17–1	55.7	8.9	57	14.1
17–5	44.3	12.0	0	23.5
17–10	36.7	12.0	0	17.5
17–15	62.6	9.7	50	21.0
17–99	66.7	5.6	0	7.0
Division average	53.2	9.6	21	16.6

Division 19—Adjustment events
19–1	44.1	10.9	0	15.3
19–5	38.2	11.7	0	15.5
Subdiv 19–A—Adjustment events
19–10	36.3	12.0	0	25.8
Subdiv 19–B—Adjustments for supplies
19–40	5.0	12.0	0	57.0
19–45	19.0	12.0	0	25.0
19–50	14.3	12.0	0	33.0
19–55	16.9	12.0	0	33.0
Subdiv average	13.8	12.0	0	37.0
Subdiv 19–C—Adjustments for acquisitions
19–70	0.0	12.0	0	66.0
19–75	10.2	12.0	0	27.0
19–80	4.2	12.0	0	41.0
19–85	6.3	12.0	0	41.0
Subdiv average	5.2	12.0	0	43.8
Division average	17.7	11.9	0	34.5

Division 21—Bad debts
21–1	46.1	12.0	33	24.0
21–5	67.6	10.2	0	25.6
21–10	65.7	9.7	0	23.0
21–15	65.6	10.9	0	27.6
21–20	66.6	10.6	0	27.0
21–99	66.4	5.2	0	5.0
Division average	63.0	9.8	6	22.0

Part 2–5—Registration

Division 23—Who is required to be registered and who may be registered
23–1	68.7	6.4	0	11.0
23–5	50.6	9.6	0	14.0
23–10	49.7	12.0	100	23.5
23–15	30.5	10.7	0	7.0
Division average	49.9	9.7	25	13.9

Division 25—How you become registered, and how your registration can be cancelled
Subdiv 25–A—How you become registered
25–1	52.8	8.3	0	10.0
25–5	35.1	12.0	0	21.3
25–10	37.8	12.0	25	26.5
25–15	46.9	10.9	66	17.0
Subdiv average	43.2	10.8	23	18.7
Subdiv 25–B—How your registration can be cancelled
25–50	50.2	12.0	0	24.0
25–55	34.6	12.0	0	20.1
25–60	29.9	12.0	0	23.0
25–65	61.3	7.1	0	10.0
Subdiv average	44.0	10.8	0	19.3
Division average	43.6	10.8	11	19.0

Part 2–6—Tax periods

Division 27—How to work out the tax periods that apply to you
27–1	73.7	7.5	50	18.5
27–5	0.0	12.0	0	7.0
27–10	53.0	10.9	0	20.3
27–15	36.9	12.0	0	20.7
27–20	42.8	11.5	0	17.3
27–25	25.7	12.0	0	23.2
27–30	45.4	12.0	20	21.6
27–35	75.3	7.0	0	17.3
27–37	7.9	12.0	33	19.0
27–38	17.1	12.0	16	22.6
27–40	41.5	12.0	100	29.3
Division average	38.1	11.0	20	19.7

Division 29—What is attributable to tax periods
29–1	34.1	12.0	25	15.5
Subdiv 29–A—The attribution rules
29–5	45.5	12.0	100	24.5
29–10	44.2	12.0	40	25.2
29–15	28.3	12.0	0	30.0
29–20	46.1	12.0	20	22.6
29–25	30.8	12.0	33	16.6
29–39	12.4	12.0	0	4.0
Subdiv average	34.6	12.0	32	20.5
Subdiv 29–B—Accounting on a cash basis
29–40	40.5	12.0	0	27.0
29–45	43.5	12.0	0	23.4
29–50	39.4	12.0	0	25.7
Subdiv average	41.1	12.0	0	25.4
Subdiv 29–C—Tax invoices and adjustment notes
29–70	50.4	12.0	0	23.2
29–75	46.3	12.0	40	22.2
29–80	15.7	12.0	0	32.0
Subdiv average	37.5	12.0	13	25.8
Division average	36.7	12.0	20	22.5

Part 2–7—Returns, payments and refunds

Division 31—GST returns
31–1	34.4	12.0	0	21.0
31–5	52.5	10.7	0	19.5
31–10	29.5	11.1	0	8.0
31–15	47.6	10.9	33	17.3
31–20	30.7	12.0	50	36.5
31–25	20.3	12.0	14	20.0
Division average	35.8	11.5	16	20.4

Division 33—Payments of GST
33–1	35.9	12.0	20	20.0
33–5	53.9	12.0	0	36.0
33–10	32.9	12.0	20	21.6
33–15	42.3	12.0	33	24.6
Division average	41.3	12.0	18	25.6

Division 35—Refunds
35–1	44.8	11.9	0	20.0
35–5	39.7	12.0	0	26.7
35–10	13.2	12.0	100	24.0
35–99	26.6	12.0	0	16.0
Division average	31.1	12.0	25	21.7

Part 2–8—Checklist of special rules

Division 37—Checklist of special rules
37–1	53.3	7.1	0	5.3

Chapter 3—The exemptions

Part 3–1—Supplies that are not taxable supplies

Division 38—GST-free supplies
38–1	55.6	8.9	0	14.0
Subdiv 38–A—Food
38–2	100.0	0.5	0	6.0
38–3	57.2	10.9	33	23.0
38–4	48.0	9.4	50	11.5
38–5	50.0	12.0	0	32.0
38–6	80.0	6.3	50	17.0
Subdiv average	67.0	7.8	27	17.9
Subdiv 38–B—Health
38–7	51.3	10.0	33	16.0
38–10	56.3	9.7	60	17.6
38–15	70.1	7.6	0	17.0
38–20	56.2	9.5	0	16.6
38–25	54.6	10.7	0	20.5
38–30	48.6	11.9	0	22.2
38–35	34.3	12.0	0	37.0
38–40	25.2	12.0	0	31.0
38–45	45.9	12.0	33	32.6
38–47	54.1	12.0	50	33.5
38–50	41.1	11.7	25	16.8
38–55	45.0	9.3	0	9.7
Subdiv average	48.6	10.7	17	22.5
Subdiv 38–C—Education
38–85	51.0	11.8	100	23.0
38–90	62.1	7.6	0	12.5
38–95	44.9	10.7	0	15.0
38–97	43.9	10.3	0	13.0
38–100	29.5	11.1	0	8.0
38–105	35.1	11.8	20	14.2
38–110	0.0	12.0	0	3.6
Subdiv average	38.1	10.8	17	12.8
Subdiv 38–D—Child care
38–140	61.3	7.1	100	10.0
38–145	53.3	11.6	50	23.5
38–150	57.2	8.0	0	11.0
38–155	88.9	3.8	0	12.0
Subdiv average	65.2	7.6	38	14.1
Subdiv 38–E—Exports and other supplies for consumption outside Australia
38–185	50.0	11.6	40	21.5
38–187	53.2	10.7	100	20.0
38–188	42.4	12.0	100	28.0
38–190	35.4	12.0	85	25.0
Subdiv average	45.3	11.6	81	23.6
Subdiv 38–F—Religious services
38–220	61.2	6.7	0	8.0
Subdiv 38–G—Non-commercial activities of charitable institutions etc.
38–250	37.4	12.0	0	18.3
Subdiv 38–H—Raffles and bingo conducted by charitable institutions etc.
38–270	26.9	12.0	0	10.5
Subdiv 38–I—Water, sewerage and drainage
38–285	57.9	8.4	0	13.3
Subdiv 38–J—Supplies of going concerns
38–325	62.6	10.4	0	24.0
Subdiv 38–K—Transport and related matters
38–355	44.1	9.3	0	9.0
Subdiv 38–L—Precious metals
38–385	43.0	10.2	50	12.0
Subdiv 38–M—Supplies through inwards duty free shops
38–415	66.1	9.9	0	24.0
Subdiv 38–N—Grants of freehold and similar interests by governments
38–445	68.2	8.0	0	17.5
Subdiv 38–O—Farm land
38–475	52.3	11.5	100	22.5
Subdiv 38–P—Cars for use by disabled people
38–505	57.8	10.2	0	20.2
Subdiv 38–Q—International mail
38–540	17.4	12.0	0	6.0
Division average	50.6	10.0	24	17.8

Division 40—Input taxed supplies
40–1	42.5	11.3	33	16.0
Subdiv 40–A—Financial supplies
40–5	46.9	8.5	50	7.5
Subdiv 40–B—Residential rent
40–35	36.5	12.0	0	31.5
Subdiv 40–C—Residential premises
40–65	13.1	12.0	0	20.0
Subdiv 40–D—Precious metals
40–100	47.5	10.0	50	14.0
Subdiv 40–E—School tuckshops and canteens
40–130	69.8	8.6	0	20.6
Subdiv 40–F—Fund-raising events conducted by charitable institutions etc.
40–160	71.0	7.8	100	18.0
Division average	46.8	10.0	33	18.2

Part 3–2—Non-taxable importations

Division 42—Non taxable importations
42–1	18.4	12.0	0	12.0
42–10	36.4	12.0	0	22.0
Division average	27.4	12.0	0	17.0

Chapter 4—The special rules

Division 45—Introduction
45–1	56.2	9.3	0	15.8
45–5	19.1	12.0	0	22.0
Division average	37.7	10.7	0	18.9

Part 4–1—Special rules mainly about particular ways entities are organised

Division 48—GST groups
48–1	34.8	12.0	33	34.3
Subdiv 48–A—Approval of GST groups
48–5	41.1	12.0	25	19.2
Subdiv 48–B—Consequences of approval of GST groups
48–40	30.7	12.0	0	26.0
Subdiv 48–C—Administrative matters
48–70	27.1	12.0	0	25.7
Subdiv 48–D—Ceasing to be a member of a GST group
48–110	49.0	12.0	0	24.5
Division average	36.5	12.0	12	25.9

Division 49—GST religious groups
Subdiv 49–A—Approval of GST religious groups
49–1	57.1	8.2	100	12.0
Subdiv 49–B—Consequences of approval of GST religious groups
49–30	55.6	10.9	50	22.0
Subdiv 49–C—Administrative matters
49–70	25.1	12.0	0	26.5
Division average	45.9	10.4	50	20.2

Division 51—GST joint ventures
51–1	32.2	12.0	0	30.6
Subdiv 51–A—Approval of GST joint ventures
51–5	34.0	12.0	50	22.2
Subdiv 51–B—Consequences of approval of GST joint ventures
51–30	41.2	11.2	33	15.0
Subdiv 51–C—Administrative matters
51–70	15.8	12.0	0	25.5
Subdiv 51–D—Ceasing to be a participant in, or an operator of, a GST joint venture
51–110	54.2	9.7	0	16.5
Division average	35.5	11.4	17	22.0

Division 54—GST branches
54–1	59.3	9.0	100	16.5
Subdiv 54–A—Registration of GST branches
54–5	41.9	12.0	40	24.4
Subdiv 54–B—Consequences of registration of GST branches
54–40	43.7	12.0	0	28.3
Subdiv 54–C—Cancellation of registration of GST branches
54–70	45.7	12.0	0	31.0
Division average	47.7	11.3	35	25.1

Division 57—Resident agents acting for non-residents
57–1	14.2	12.0	0	23.0
57–5	26.9	12.0	0	10.5
57–25	19.4	12.0	0	20.0
57–50	61.6	9.1	0	18.0
Division average	30.5	11.3	0	17.9

Division 60—Pre-establishment costs
60–1	27.3	12.0	100	24.0
60–5	33.9	12.0	0	19.0
60–20	33.7	12.0	0	27.0
60–35	7.9	12.0	0	47.0
Division average	25.7	12.0	25	29.3

Division 63—Non-profit sub-entities
63–1	38.4	12.0	0	19.3
63–5	32.4	11.0	0	9.5
63–30	33.2	12.0	0	22.6
63–50	35.9	10.7	0	10.0
Division average	35.0	11.4	0	15.4

Part 4–2—Special rules mainly about supplies and acquisitions

Division 66—Second-hand goods
66–1	43.7	12.0	50	26.0
Subdiv 66–A—Input tax credits for acquiring second-hand goods
66–5	45.7	12.0	0	24.6
66–10	41.7	12.0	0	27.2
66–20	28.3	12.0	0	12.5
Subdiv average	38.6	12.0	0	21.4
Subdiv 66–B—Acquisitions of second-hand goods that are divided for re-supply
66–40	59.6	9.9	0	20.0
66–55	57.2	8.0	0	11.0
66–70	21.7	12.0	50	21.5
Subdiv average	46.2	10.0	17	17.5
Division average	42.6	11.1	14	20.4

Division 69—Non-deductible expenses
69–1	16.5	12.0	50	18.5
69–10	33.1	12.0	0	19.0
Division average	24.8	12.0	25	18.8

Division 70—Financial supplies (reduced credit acquisitions)
70–1	35.2	12.0	0	27.0
70–15	31.6	12.0	25	22.0
Division average	33.4	12.0	13	24.5

Division 71—Financial supplies (acquisitions and importations to provide fringe benefits)
71–1	26.6	12.0	0	25.5
71–10	27.0	12.0	0	22.6
Division average	26.8	12.0	0	24.1

Division 72—Associates
72–1	10.5	12.0	100	34.0
Subdiv 72–A—Supplies without consideration
72–5	32.8	12.0	33	18.3
Subdiv 72–B—Acquisitions without consideration
72–40	19.4	12.0	33	24.6
Subdiv 72–C—Supplies for inadequate consideration
72–70	42.8	12.0	0	19.3
Subdiv 72–D—Application of this Division to certain sub-entities
72–90	31.5	10.3	0	6.0
Division average	27.4	11.7	33	20.4

Division 75—Sale of freehold interests etc.
75–1	46.6	12.0	0	30.0
75–5	58.7	11.7	50	27.0
Division average	52.7	11.9	25	28.5

Division 78—Insurance
78–1	39.4	12.0	50	18.5
Subdiv 78–A—Insurers
78–5	44.3	12.0	50	28.5
78–25	47.7	10.8	0	17.0
Subdiv average	46.0	11.4	25	22.8
Subdiv 78–B—Insured entities etc.
78–45	31.4	12.0	0	26.5
78–60	36.2	12.0	0	35.6
Subdiv average	33.8	12.0	0	31.1
Subdiv 78–C—Third parties
78–65	34.6	12.0	33	31.3
Subdiv 78–D—Insured entities that are not registered etc.
78–80	33.2	12.0	0	27.0
Subdiv 78–E—Statutory compensation schemes
78–95	35.2	12.0	0	31.5
Subdiv 78–F—Miscellaneous
78–110	73.1	6.7	100	15.0
Division average	41.7	11.3	26	25.7

Division 81—Payments of taxes, fees and charges
81–1	47.8	12.0	0	27.0

Division 83—Non-residents making supplies connected with Australia
83–1	48.5	11.7	0	21.0
83–20	40.6	12.0	0	20.0
83–35	25.7	12.0	0	25.0
Division average	38.3	11.9	0	22.0

Division 84—Offshore supplies other than goods or real property
84–1	47.3	12.0	0	23.0
84–12	53.9	10.6	0	20.0
Division average	50.6	11.3	0	21.5

Division 85—Telecommunication supplies
85–1	19.0	12.0	100	25.0
85–5	24.8	12.0	66	19.6
Division average	21.9	12.0	83	22.3

Division 87—Long-term accommodation in commercial residential premises
87–1	24.3	12.0	0	21.0
87–15	0.0	12.0	0	8.0
Division average	12.2	12.0	0	14.5

Division 90—Company amalgamations
90–1	9.9	12.0	100	18.0
90–15	0.0	12.0	0	25.5
90–35	13.5	12.0	0	33.6
Division average	7.8	12.0	33	25.7

Division 93—Returnable containers
93–1	28.4	12.0	0	21.0
93–15	27.8	12.0	50	24.2
Division average	28.1	12.0	25	22.6

Division 96—Supplies partly connected with Australia
96–1	32.3	12.0	100	33.0
96–10	47.5	12.0	0	25.3
Division average	39.9	12.0	50	29.2

Division 99—Deposits as security
99–1	34.3	12.0	50	17.5
99–10	35.9	11.3	33	12.6
Division average	35.1	11.7	42	15.1

Division 100—Vouchers
100–1	53.5	12.0	0	28.0
100–20	30.7	12.0	0	26.0
Division average	42.1	12.0	0	27.0

Division 102—Cancelled lay-by sales
102–1	58.4	9.8	100	19.0
102–10	24.3	12.0	50	21.0
Division average	41.4	10.9	75	20.0

Division 105—Supplies in satisfaction of debts
105–1	44.6	12.0	0	27.0
105–15	51.9	11.6	0	22.6
Division average	48.3	11.8	0	24.8

Division 108—Valuation of taxable supplies of goods in bond
108–1	37.2	12.0	0	41.0
108–5	49.5	10.6	25	17.2
Division average	43.4	11.3	13	29.1

Division 111—Reimbursement of employees etc.
111–1	30.0	12.0	0	20.0
111–15	2.5	12.0	0	47.0
111–20	30.0	12.0	0	20.0
Division average	20.8	12.0	0	29.0

Division 113—PAYG voluntary agreements
113–1	38.1	12.0	0	18.0
113–5	31.2	12.0	0	20.5
Division average	34.7	12.0	0	19.3

Part 4–3—Special rules mainly about importations

Division 114—Importations without entry for home consumption
114–1	29.9	12.0	50	25.5
114–10	38.1	12.0	100	23.0
Division average	34.0	12.0	75	24.3

Division 117—Importation of goods that were exported for repair or renovation
117–1	27.4	12.0	0	43.0
117–5	42.7	10.8	0	14.3
Division average	35.1	11.4	0	28.7

Part 4–4—Special rules mainly about net amounts and adjustments

Division 123—Simplified accounting methods for retailers
123–1	43.2	12.0	0	29.0
123–10	51.0	10.1	0	16.2
Division average	47.1	11.1	0	22.6

Division 126—Gambling
126–1	28.6	12.0	0	35.0
126–20	35.7	12.0	25	32.2
126–33	51.7	10.7	0	19.0
Division average	38.7	11.6	8	28.7

Division 129—Changes in the extent of creditable purpose
129–1	42.7	12.0	50	25.0
Subdiv 129–A—General
129–10	12.3	12.0	0	27.0
Subdiv 129–B—Adjustment periods
129–25	27.4	12.0	0	17.2
Subdiv 129–C—When adjustments for acquisitions and importations arise
129–40	43.1	11.2	0	16.3
129–55	49.5	9.0	0	11.0
Subdiv average	46.3	10.1	0	13.7
Subdiv 129–D—Amounts of adjustments for acquisitions and importations
129–75	31.5	12.0	0	29.0
Subdiv 129–E—Attributing adjustments under this Division
129–90	22.8	12.0	0	19.0
Division average	32.8	11.5	7	20.6

Division 130—Goods applied solely to private or domestic use
130–1	59.6	11.1	0	25.0
130–5	32.6	12.0	0	23.0
Division average	46.1	11.6	0	24.0

Division 132—Supplies of things acquired, imported or applied to make financial supplies
132–1	37.2	12.0	0	26.0
132–10	41.5	12.0	0	20.5
Division average	39.4	12.0	0	23.3

Division 135—Supplies of going concerns
135–1	49.9	12.0	50	25.5
135–10	40.7	12.0	100	31.0
Division average	45.3	12.0	75	28.3

Division 136—Bad debts relating to partly taxable or creditable transactions
136–1	25.2	12.0	0	37.0
136–10	27.6	12.0	0	24.1
Division average	26.4	12.0	0	30.6

Division 137—Stock on hand on becoming registered etc.
137–1	48.5	11.7	0	21.0
137–5	38.4	12.0	0	19.5
Division average	43.5	11.9	0	20.3

Division 138—Cessation of registration
138–1	34.3	12.0	50	17.5
138–15	28.9	12.0	0	20.6
Division average	31.6	12.0	25	19.1

Division 139—Distributions from deceased estates
139–1	31.7	12.0	0	22.5
139–10	32.8	12.0	0	15.5
Division average	32.3	12.0	0	19.0

Division 141—Trade scheme goods
141–1	53.1	11.1	50	21.5
141–15	22.9	12.0	0	14.5
Division average	38.0	11.6	25	18.0

Part 4–5—Special rules mainly about registration

Division 144—Taxis
144–1	19.0	12.0	100	10.0
144–5	53.3	9.6	0	15.3
Division average	36.2	10.8	50	12.7

Division 147—Representatives of incapacitated entities
147–1	0.0	12.0	0	12.0
147–15	11.1	12.0	0	29.0
Division average	5.6	12.0	0	20.5

Division 149—Government entities
149–1	51.5	9.3	0	13.3
149–15	40.2	12.0	100	29.0
Division average	45.9	10.7	50	21.2

Part 4–6—Special rules mainly about tax periods

Division 153—Agents and insurance brokers
153–1	44.3	12.0	100	28.5
Subdiv 153–A—General
153–15	47.5	11.0	25	18.0
Subdiv 153–B—Principals and agents as separate suppliers or acquirers
153–55	41.9	12.0	28	22.1
Division average	44.6	11.7	51	22.9

Division 156—Supplies and acquisitions made on a progressive or periodic basis
156–1	19.6	12.0	100	27.0
156–20	13.0	12.0	100	32.0
Division average	16.3	12.0	100	29.5

Division 159—Changing your accounting basis
159–1	38.3	12.0	100	35.0
159–15	13.7	12.0	0	23.5
Division average	26.0	12.0	50	29.3

Part 4–7—Special rules mainly about returns, payments and refunds

Division 165—Anti-avoidance
165–1	46.1	12.0	25	29.0
Subdiv 165–A—Application of this Division
165–5	64.3	9.0	66	19.0
165–15	47.1	12.0	0	31.0
Subdiv average	55.7	10.5	33	25.0
Subdiv 165–B—Commissioner may negate effects of schemes for GST benefits
165–40	37.1	12.0	0	30.5
165–55	17.3	12.0	0	20.0
Subdiv average	27.2	12.0	0	25.3
Division average	42.4	11.4	18	25.9

Division 168—Tourist refund scheme
168–1	57.7	12.0	0	29.0
168–5	47.5	10.0	50	14.0
Division average	52.6	11.0	25	21.5

Division 171—Customs security etc. given on taxable importations
171–1	27.3	12.0	50	15.5
171–5	32.0	12.0	80	26.0
Division average	29.7	12.0	65	20.8

Chapter 5—Miscellaneous

Part 5–1—Miscellaneous

Division 177—Miscellaneous
177–5	44.0	11.7	0	18.5

Chapter 6—Interpreting this Act

Part 6–1—Rules for interpreting this Act

Division 182—Rules for interpreting this Act
182–1	43.6	11.5	33	17.6
182–5	6.3	12.0	0	3.0
Division average	25.0	11.8	17	10.3

Part 6–2—Meaning of some important concepts

Division 184—Meaning of entity
184–1	52.5	10.3	31	17.6

Division 188—Meaning of annual turnover
188–1	39.3	12.0	0	25.0
188–15	57.3	8.9	100	14.6
188–24	27.4	12.0	50	30.5
Division average	41.3	11.0	50	23.4

Division 189—Exceeding the financial acquisitions threshold
189–1	25.2	12.0	100	31.0
189–10	21.5	12.0	0	51.0
Division average	23.4	12.0	50	41.0

Division 190—90% owned groups of companies
19–1	78.8	5	0	15.0

Part 6–3—Dictionary

Division 195—Dictionary
Airport shop goods	69.9	6.7	0	13.0
Commercial accommodation	0.0	12.0	0	9.0
Education course	15.6	12.0	0	5.0
Fringe benefit	11.6	12.0	0	43.0
Health Minister	11.0	12.0	0	11.0
Local entry	34.2	12.0	0	20.0
Non-deductible expense	10.5	12.0	0	10.0
Professional or trade course	61.6	9.1	0	18.0
Retailer	49.0	12.0	0	29.0
Tertiary course	40.0	12.0	0	23.0
Division average	30.3	11.2	0	18.1

Schedule 1—Food that is not GST-free
Prepared meals	50.2	10.4	0	17.0

Schedule 2—Beverages that are not GST-free
Tea, coffee etc.	55.0	9.1	50	14.5

Overall average	40.3	11.0	20	20.9

^[*] Senior Lecturer, Department of Business Law and Taxation, Monash University; Co-Editor of the Journal of Australian Taxation.

^[2] Commonwealth of Australia, Reform of the Australian Tax System Draft White Paper ('Draft White Paper') (1985), 9.

^[4] Indeed, the TLIP style of drafting was supposed to inform and be applied in all taxation drafting thenceforward.

^[6] Adam Smith, The Wealth of Nations (first published 1776, 1904 ed). Smith explained tax simplicity as: '... the tax which each individual is bound to pay ought to be certain, and not arbitrary. The time of payment, the manner of payment, the quantity to be paid, ought all to be clear and plain to the contributor, and to every other person. Where it is otherwise "the taxpayer" is put more or less in the hands of the tax gatherer'.

^[7] David Smith and Grant Richardson, 'The Readability of Australia's Taxation Laws and Supplementary Materials: An Empirical Investigation' (1999) 20 Fiscal Studies 321.

^[15] Joint Committee of Public Accounts, Parliament of Australia, An Assessment of Tax: A Report on an Inquiry into the Australian Taxation Office (1993).

^[20] Simon James and Ian Wallschutzky, 'Tax Law Improvement in Australia and the UK: The Need for a Strategy for Simplification' (1997) 18 Fiscal Studies 445.

^[22] Edgar Dale and Jeanne S Chall, 'A Formula for Predicting Readability' (1948) 27 Education Research Bulletin 11, 37.

^[25] Rudolph Flesch, 'A New Readability Yardstick' (1948) 32 Journal of Applied Psychology 221.

^[26] Tan and Tower, above n 8, 361; Bruce Koch and Stewart Karlinsky, 'The Effect of Federal Income Tax Law Reading Complexity on Students' Task Performance' (1984) 2 Issues in Accounting Education 98.

^[27] Graeme Cooper, 'Themes and Issues in Tax Simplification' (1993) 10 Australian Tax Forum 417, 424. Apart from 'clarity of expression', Cooper also argued that the conception of simplicity is represented by elements of predictability, proportionality, consistency, compliance, administration and co-ordination. Furthermore, Cooper also asserted that complexity can be found at four different levels of a taxation system. The first level is in the 'choice of the tax base'. The second level is the 'design of the rules' to be applied to the tax base. The third level relates to the 'expression of those rules'. Finally, the fourth level of complexity is related to the 'administrative requirements' imposed on taxpayers.

^[28] George Klare, 'Readability' in P David Pearson (ed), Handbook of Reading Research (1984) 681.

^[29] See for example, Phillip M J Reckers and A J Stagliano, 'State Income Tax Forms: A Test of Readability' [1980] Akron Business and Economic Review 42, cited in Tan and Tower, above n 8, 361.

^[31] Beverly Zakaluk and S Jay Samuels, 'Toward a New Approach to Predicting Text Comprehensibility' in Beverly Zakaluk and S Jay Samuels (eds), Readability: Its Past, Present, and Future (1988) 125; Tan and Tower, above n 8, 361.

^[33] John Courtis, 'Annual Report Readability Variability: Tests of the Obfuscation Hypothesis' (1998) 11 Accounting, Auditing and Accountability Journal 459.

^[34] Colin Harrison, Readability in the Classroom (1980) 77. Moreover, Harrison contended that while it is theoretically possible to produce scores that fall outside the range of 0 to 100, in practice, such scores are infrequent.

^[35] George Klare, 'The Formative Years' in Beverly. Zakaluk and S Jay Samuels (eds), Readability: Its Past, Present and Future (1988) 20.

^[36] See, eg, George England, Margaret Thomas and Donald Paterson, 'Reliability of the Original and the Simplified Flesch Reading Ease Formulas' (1953) 37 Journal of Applied Psychology 111; Patricia Hayes, James Jenkins and Bradley Walker, 'Reliability of the Flesch Readability Formulas' (1950) 34 Journal of Applied Psychology 22.

^[39] Richardson and Sawyer, above n 9, 159. It should be noted that Richardson and Sawyer were questioning the accuracy of earlier versions of word processing packages, not Microsoft Word 97.

^[40] This procedure was also undertaken in Smith and Richardson, above n 7, 328.

^[45] Robin Woellner, Simon Gaylard, Margaret McKerchar, Michael Walpole, Cynthia Coleman and Julie Zetler, 'Once More into the Breach ... A Study of Comparative Compliance Costs under the 1936 and 1997 Acts: Progress Report' in Chris Evans and Abe Greenbaum (eds), Tax Administration: Facing the Challenges of the Future (1998) 195.

^[50] J P Kincaid et al, Derivation of New Readability Formulas (Automated Readability Index, Fog Count, and Flesch Reading Ease Formula) for Navy Enlisted Personnel (Branch Report 8-75, Chief of Naval Training, 1975).

^[51] Harrison, above n 34, 109. Furthermore, it is reasonable to expect that that the reading ability of Australian and US students is approximately the same, all else equal. This would mean that if a document receives a score of eight on the F-KGL Index, a 14–15 year old Australian should be able to read and understand the document.

^[52] A comprehensive list of the empirical results obtained for the GST sections analysed for readability appears below as an Appendix.

Flesch Score	GST Legislation _______________________		Education Level*	General Reading Ease Scale
	Number	Percentage
Below 30	91	25.85%	University Graduate	Very Difficult
30–50	163	46.31%	University Under-graduate	Difficult
50.1–60	56	15.91%	Forms 5-7	Fairly Difficult
60.1–70	27	7.67%	Forms 3-4	Standard
70.1–80	10	2.84%	Form 2	Fairly Easy
80.1–90	2	0.57%	Form 1	Easy
90.1–100	3	0.85%	Standard 4	Very Easy
Totals	352	100.00

Legislation	Flesch*	F-KGL**	PS (%)***	WPS (Av.)****
GST Act	40.3	11.0	20	20.9
ITAA36	38.44	10.79	17.1	39.02
ITAA97	46.42	10.76	20.81	22.27