Costello Sounds Death Knell For Tax Value Method

by Mary Swire, Tax-News.com, Hong Kong

30 August 2002

Speaking on Wednesday, Australian Treasurer, Peter Costello announced the demise of the government's Tax Value Method (TVM) plans to simplify the country's tax code, much to the delight of the Australian business community.

Conceived nearly four years ago, drafted, re-drafted, amended, and now, finally, abandoned, the TVM was designed to be less complicated than the current corporate tax system, allowing businesses to calculate taxable income by subracting expenses from receipts and then adding changes to the net value of assets.

If introduced, the federal government argued, the method would have eliminated many costly legal battles over the distinction between income and capital, and would have made a greater range of business expenses tax deductible. However, tax experts and businesses fiercely opposed the introduction of the TVM, arguing that it would have served to complicate rather than simplify the Australian tax system, and would have resulted in additional transitional compliance costs for businesses.

Speaking to the Sydney Morning Herald on Wednesday, Michael Dirkis, tax director of the Tax Institute of Australia welcomed Mr Costello's announcement:

'We are happy to say that chapter in tax reform has gone away. It is good that the government has seen common sense with this issue,' he commented.

Institute of Chartered Accountants tax counsel, Brian Sheppard echoed this sentiment, explaining to the newspaper that: 'It wasn't going to deliver a simplified tax system, just a different tax system.'

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