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Accountants verdict



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MEDIA RELEASE

14 August 1998

Accountants Verdict -------------iy

"Pleasantly surprised at the extent of reform"

The National Institute of Accountants (NIA) views the Governments Tax Reform , Package as a good effort and having achieved the primary aim of restructuring what is currently an overly complex taxation system.

The specifics and deliverables of the tax package should be greatly influenced by public debate, said Patrick Derham, President of the NIA.

The GST component of the reform is a positive move and one that is supported by over 60% of NIA members as indicated in a recent member survey. A GST will effectively trap part of the black economy that thrives beyond the parameters of the existing system. Over time the Government will need to show that they are serious in ensuring that the cash economy is caught by effective enforcement and education.

Through the reduction of marginal tax rates the incentive to avoid tax has been reduced because the benefits of avoidance are far less. People that employ trusts will no longer have as big an incentive to use such vehicles to avoid tax because of the lower tax rates.

The tax package addresses both indirect tax and income tax but does not delve far enough into other areas of tax. The proposed changes to the rules governing income tax are disappointing and do not reduce the complexity of the legislation to the extent that this package intended.

An issue for debate is the full effect of the introduction of a GST on the business sector. It can be foreseen that certain industries will have dramatic transitional effects with a boom then bust approach from a consumption viewpoint. The consumption patterns will take some years to settle down.

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The general public has shown that they do not fully understand the implications of a GST. An extensive education process will be required particularly in clarifying the positive impact of the withdrawal of the wholesale sales tax.

Small business may look forward to benefiting from greater cash flows as a . . . result of the replacement of provisional tax with the pay as you go system. This is a sweetener for small businesses within the overall package.

The NIA believes that all sectors of the community should take the time and effort to analyse the tax reform package and assess the implications for them. The immediate reactions that we are seeing should be the start of the extensive analysis process but should not form the final conclusions.

Patrick Derham is available for further comment on 0412 713 829.

For more information contact: Jocelyn Robinson Marketing/PR Manager Ph: (03) 9249 5590 Fax: (03) 9249 5551 E-mail: jocelynr@nia.org.au