TLIP: Lip service or in service? A review of the non-commercial loss and STS measures against the TLIP principles.
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In order to address criticisms about the extraordinary complexity of the Australian income tax system, the Federal Government embarked on an ambitious mission in the mid-1990s to simplify the income tax legislation. Part of this response was the creation of the Tax Law Improvement Project taskforce to rewrite the Income Tax Assessment Act 1936 ('the 1936 Act') into plain English. The rewrite project was to have been accorded priority until its ultimate completion; however, in 1998 there was a major diversion of resources away from the income tax act's rewrite in order to implement the new Tax Reform measures. This resulted in the rewrite project being set aside and left incomplete; yet, new provisions have continued to be inserted into the new Income Tax Assessment Act 1997 ('the 1997 Act'). Whilst the mandate of the TLIP taskforce was only to simplify the legislation through improving readability without effecting any major policy changes, it is nonetheless submitted that the project still made a valuable contribution to the process of income tax simplification by devising a set of drafting techniques that improve the readability of tax legislation. Readability is linked to improved taxpayer compliance by increasing the capacity and willingness of taxpayers to comply with tax laws through reducing the compliance costs necessary to understand and work with the legislation. This paper examines whether the TLIP drafting principles are still being applied when new legislative tax provisions are drafted. This examination is desirable because as considerable resources have already been invested into developing this arguably successful method of drafting simpler tax legislation, these drafting principles should continue to be applied to new tax legislation in order to achieve more readable tax legislation, which is linked to reduced compliance costs and increased compliance. The results of this study will indicate that the TLIP drafting principles are being applied to the new legislative provisions studied, and that the resulting readability is of an arguably acceptable standard for professional users. However, the readability of supporting material such as public rulings was found to be more difficult overall than legislation. Given that the supporting material is intended to aid the understanding of the legislative provisions, this finding is of concern; although it may be that the difficulties in synthesising the application of the law to factual scenarios, as well as the need to protect taxpayer privacy are the main causes for this phenomenon.
Australian Tax Forum
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