Last financial year 9.8 million taxpayers lodged a tax return. Of them 78 per cent claimed work-related expenses, totalling $6 billion, or about $600 each.
The Australian Society of Certified Practising Accountants estimates that the paperwork costs about $700 million, though at $70 a return that seems on the high side. The society suggests that there would be considerable saving if work-related expenses were abolished altogether or abolished and the savings and the value of the claims averaged through reduced tax rates.
There is some merit in the idea. But the savings have to be calculated fairly carefully. Even if work-related expenses were abandoned, many taxpayers would still need to put in a return. The Australian Tax Office says 42 per cent of taxpayers claim charitable gifts and 24 per cent claim investment income. These would have to be dealt with if the office wanted a large reduction in the number of tax returns it processes.
It should be a fairly simple thing to make the first $500 in investment income (from dividends and interest) tax free. Dealing with charities would be more difficult. People might give less if their gifts were not deductible. Perhaps only gifts over, say, $500 should be deductible.
Whatever changes are made to the tax system to reduce administrative costs it is important that PAYE tax-payers get all of the benefit and that charities are not adversely affected. PAYE tax-payers rightly feel they bear an unfair burden in the tax system.
That impression might get worse if the system is changed so that most do not fill in a return. They will get the feeling that the taxman swipes the money out of their pay-packets while business people with artful accountants and lawyers can reduce their burden.
In any event Australia must start taxing consumption more and income less and make the changes in a fair way.