Comparing British and Australian digital tax plans
John Preston, Incoming CIOT President of the Chartered Institute of Taxation (CIOT), sets out some of the differences between the approaches of the UK and Australian revenue authorities in the ways they are implementing their respective Making Tax Digital (MTD) programmes.
I wrote to the House of Commons Treasury Committee, at the request of the Committee chair Andrew Tyrie, after my recent visit to Australia. The Committee had begun evidence hearings with tax and financial professionals about the UK‚ s MTD project before further planned sessions were cancelled because of dissolution of Parliament to enable the snap General Election.
The two countries are not in the same place in the introduction of digitalisation into their tax systems. For example, it seems that we moved towards voluntary filing of certain types of tax returns earlier than them. Thus the two systems are not necessarily directly comparable despite the identical names of their projects, and my comments need to be read with that in mind.
A common feature is that the professional bodies in both countries are entirely supportive of the principle of their respective Government‚ s MTD projects. They are both keen to assist their respective tax revenue authorities in making the introduction of MTD a success. HMRC and the Australian Taxation Office, as one would expect, have constructively exchanged detailed information regarding each other‚ s approaches.
A significant difference between us and them, is that their system is not being seen or driven as a significant opportunity in itself to achieve an early reduction in the tax gap. Accordingly, there is no attempt to make quarterly record keeping compulsory for smaller businesses before focusing on larger businesses.
Another difference is that there is a recognition by the Australian tax office that allowing tax agents to have full access to their clients' records from day one is a fundamental and necessary requirement to the scheme‚ s success.
We welcomed the one year deferral from mandatory MTD requirements for UK businesses under the VAT threshold (£83,000), announced in the recent Spring Budget. This at least took some account of the unprecedented technological and logistical challenges which will be faced by the many small businesses and landlords which are not currently maintaining digital records or interacting with HMRC on a frequent basis. But we remain of the opinion that the timetable for mandatory quarterly reporting remains extremely challenging, with the many complexities of tax still needing to be translated into functioning software, and the diverse nature of businesses accommodated, not to mention how their agents can support them.
In contrast, the time frame over which changes are being introduced by the Australian tax office is less stringent But, to be fair to HMRC, it has adopted a more structured and holistic approach than that which has so far been undertaken in Australia, but that does not detract from the significance of the issues identified.
A closer look at the Australia‚ s approach shows that for individual taxpayers, there are online tools such as ‚ myTax‚ which sits in the ‚ myGov‚ site, and others such as the ‚ myDeductions‚ app, and the ATO app.
For businesses, aside from the Business portal, there is the ‚ Single Touch Payroll‚ initiative which is a government initiative to streamline business reporting obligations (such as under the Australian equivalent of PAYE).
Furthermore, for business people there is ‚ Standard Business Reporting‚ which is a whole-of government standard approach to online or digital record-keeping that was introduced by government in 2010 to simplify business reporting obligations. For tax agents, there is the tax agent portal and a change from using the ‚ Electronic Lodgment System' (ELS) to the ‚ Practitioner Lodgement System' (PLS).
For superannuation, there is ‚ SuperStream‚ which is the way businesses must pay employee superannuation guarantee contributions to the relevant funds. With ‚ SuperStream‚ , both money and data are sent electronically in a standard format.
For more reading, see this link to the Australian tax office blueprint for reinvention.
Blog by John Preston, Deputy President, CIOT. John will become CIOT President on May 9 2017.