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In its 2022-23 pre-budget submissions, BDO Australia have called for the Australian government toreview and simplify the Australian taxation system.
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Review and simplification at the heart of BDO’s government recommendations
14 February 2022
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The report outlined 25 recommendations from the firm, with a distinct focus on urging the Federal Government “to reinvigorate the tax reform agenda with a focus on how the tax system can be simplified, be more equitable and efficient.”
“Tax reform is not just about tax cuts,” the report states, “it entails a rational identification of how all aspects of the tax system interact with each other and with the economy and to identify how to ensure the appropriate amount of tax is collected from the right entities without causing much distortion to the economy.”
Key to BDOs recommendations for a simpler, more equitable and more economically beneficial taxation was a shift away from labelling simple tax rate changes as tax reform, towards what the report dictates is a two-step tax reform process that would result in an examination of Australia’s “many different types of tax and rationalize them where possible,” as well as the establishment of an “independent ‘Tax Reform Commission’ that would ensure that the journey of tax reform makes an ongoing process.”
In addition to BDO’s recommendations on alterations to the perception and implementation of the tax reformation system, the firm also views reformations to simplify the company tax system as pivotal in increasing the overall equitability of the tax system.
As part of its recommendations, BDO believes the Federal Government should lower the company tax rate from the current 30 per cent rate, which sits 6 per cent higher than the OECD average. BDO views a change in the company tax rate will attract larger foreign owned companies to invest in the growth and development of our economy.
Similarly, BDO’s recommendations invites the Government to review the definition of significant global entities (SGEs) “to exclude entities with less than $10 million Australian turnover to relieve them of the exorbitant potential penalty rates applicable to SGEs”.
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“Many small foreign owned subsidiaries of large international groups have only a small number of staff who usually have limited tax knowledge and are run by local management in a similar way to locally owned small businesses. However, they are potentially subject to administrative penalties of 500 times the penalties that apply to non SGE small businesses.”
“These potential exorbitant penalties can result in the business of the subsidiary in Australia closing down with the potential loss of employment and local supply chains for the relevant goods or services provided by the subsidiary in Australia. BDO proposes that the SGE definition be subject to a $10 million Australian turnover threshold to ensure such small foreign subsidiaries are competitive with local owned small businesses.”
Find the full submissions report here.
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