Barkoczy, Stephen; Nethercottl, Les --- "Editorial" [1998] JlATax 1; (1998) 1(1) Journal of Australian Taxation 2

Editorial

Associate Professors Stephen Barkoczy and Les Nethercott

It is well acknowledged that Australia has one of the most complex and voluminous income tax regimes in the world. Despite this fact, the regime is nevertheless firmly based on a self-assessment system. As a result, taxpayers are expected to understand the law and be able to apply it to their own circumstances. While the rulings system is designed as a safeguard for taxpayers, the system has its shortcomings as is apparent from cases such as CTC Resources NL v FC of T 94 ATC 4072 and, more recently, Bellinz Pty Ltd v FC of T 98 ATC 4399.

When the Income Tax Assessment Act 1936 was first introduced, it comprised approximately 120 pages. Over the years it increased to well over 3000 pages. Most of this growth occurred in the last decade. When the income tax regime is coupled with other Federal and State taxes, it is not surprising that taxpayers and their advisers are frustrated with the intricate regime in which they must operate. Moreover, disillusionment is generated by a system which is riddled with rules that appear arbitrary and not founded on any clear policy objective, but rather have arisen out of accidents of history and political compromise. As the Treasurer observes: “No one would deliberately design a tax system like this today.” (P Costello, The Australian Tax System In Need of Reform (1998) 4).

There has been bi-partisan political support for the Tax Law Improvement Project which is now in full swing. The Tax Law lmprovement Bill (No 1) 1998 represents the third stage of the rewrite and the new provisions (which include the bulk of the CGT rules) are intended to generally operate from 1 July 1998. While the tax law rewrite is based on a desire to simplify the tax laws, it is questionable whether this underlying premise is attainable. In particular, until the rewrite has been completed, it is arguable that the practice of tax law will actually be more time consuming than before. Practitioners are required to grapple with a shrinking Income Tax Assessment Act 1936 at the same time as a growing Income Tax Assessment Act 1997. Also they are required to deal with additional legislation prescribing rules which govern the transition from the old law to the new law. One of the greatest problems facing practitioners during the rewrite period is that both Acts continue to be amended. In other words, the tax laws have not remained stagnant during the rewrite period and continue to evolve at a rapid pace. There are several Bills before Parliament which contain major reforms including, for instance, new anti-avoidance rules relating to dividend streaming, franking credit trading and private company distributions.

The vast body of complex statute law is matched by an ever-increasing body of case law. The courts continue to be faced with basic questions on fundamental issues concerning income (eg Montgomery v FC of T 98 ATC 4120) and deductions (eg Steele v FC of T 97 ATC 4239). The level of litigation in the income tax arena is not expected to subside. Indeed, in the context of the rewrite, questions of interpretation are bound to arise as to whether the new Act expresses the ‘same idea’ as the old Act for the purposes of s 1–3 of the Income Tax Assessment Act 1997.

The Treasurer acknowledges that the Federal tax system is outdated and has not kept pace with changes in the economy. Tax reform is now firmly on the political agenda and a goods and services tax is at the forefront of this debate. How the introduction of such a tax could change the overall tax mix is, however, still uncertain.

It is in the above context that the Journal of Australian Taxation has been conceived. The Journal brings together the resources of CCH, Australia’s leading tax publisher, and Monash University, Australia’s largest University. It is further supported by a distinguished independent Advisory Board of senior practitioners and academics who referee all articles. The Journal aims to provide a forum for high level research and analysis of applied and topical taxation issues affecting Australia and its neighbours. We take this opportunity to thank CCH, Monash University, our Advisory Board and especially our Production Editor for their efforts, support and encouragement in the establishment of this Journal. We hope that the Journal will foster further debate and better understanding of the tax laws and we welcome your future contributions. July 1998