Document 1

s22

s22

s22 s22

s22

s22

Other options for consideration

Company tax collections last year amounted to only $52 billion.  The current costs of claims received or identified amount to over $30 billion in deductions, and if no more than half of these were ultimately deductible-due to undeclared claims it is unlikely to be so little-we are still dealing with claims amounting to 10% of armual company collections.  It is inconceivable that Government would have proceeded with the amendments, whatever was intended by the original armouncement, had that cost been apparent to it.

Recommendations 5, 6, 7 are basically clarificatory.  The probable effect of their retrospective application to categories 2 & 3 is thus not to reduce cost to revenue in the end, but only to reduce uncertainty and bring finality to unjustified claims sooner.

.

Options 8 and 9 only go to the time value of money and do not reduce the primary cost of the retrospective amendments1

The consequence is that we still talking about a significant outlay over forward estimates period that was not intended-that is, the cost was not intended, whatever was intended by the measure.

As aclmowledged at paragraph 63, Category 3 taxpayers have not relied on the amendments in commercial transactions.  They may have expected deductions on the basis of an armouncement, but the disappointment of that expectation is not in itself a sufficient reason for excluding retrospective change: they will stand the same position if the entitlements are withdrawn now as they would have been in, had Govermnent simply not proceeded with the armouncement.

A taxpayer that has actually received a refund based on a conceded claim may thereafter have acted on the basis that the money was available to it and so acted to its detriment, effectively putting it in category 2. A similar but weaker case can be made for someone that has received a ruling.  Call these category 4.

Those that have merely made claims or done nothing can suffer no detriment from the retrospective retraction of entitlements retrospectively conferred.

While it may not be for the Board to judge the appropriateness of a course of action that involves such a retrospective retraction of claims for category 3 (excluding category 4), it being a matter for Govermnent to consider, it cannot be said to be necessarily inappropriate and should be an option for consideration in the report.

Putting category 3 in the same position as ongoing claims should be mentioned as an option if not necessarily recommended.

Two points: if the substantive claim is warranted, why is interest on it not warranted?  This option may attract criticism precisely because the underlying claim is not withdrawn.  Second, the effect of spreading the cost over the next five years may not have any material budgetary advantages; it would be necessary to spread the cost over a much longer period.  Of course, if the claims are pushed into periods when the budget will be under pressure from increased outlays, the ultimate result may actually be to worse budgetary positions.

s22