Standardisation of federal and state taxes and a complete review of the GST including a long term plan to improve its administration by imposing GST on all food items are just some of the recommendations to the federal government from the Institute of Chartered Accountants in the lead up to the federal budget. 
 
Launching its Indirect Tax Policy today the Institute says significant work is also required by the state governments on indirect taxes. It says there is no justifiable excuse not to abolish or to delay the abolition of a suite of stamp duties until 2010 as has been proposed and that a long term plan to end payroll tax should be considered. 
 
The Institute has identified 10 key areas where changes need to be made to indirect tax law to ensure certainty, simplicity, fairness and a lower cost of compliance for all taxpayers. 
 
The Institute says a primary concern is inconsistent tax legislation across jurisdictions that create a compliance burden across state and federal legislation. “Australian taxpayers struggle with complex and inconsistent tax legislation and we are looking for the federal government to take the lead in easing the confusion,” Institute Tax Counsel Mr Ali Noroozi said. 
 
“As a priority the policy calls on the federal, state and territory governments to work together to standardise all federal and state taxes, federal excises and duties, state duties and charges, including workers compensation premiums,” he said. 
 
Mr Noroozi said a major component of standardisation would include consistency of certain definitions across federal and state tax legislation. For example the definition of ‘salary’ and ‘wages’ differs across the board despite the fact it is used by business as the basis for calculating liability for pay-roll tax, workers compensation, PAYG withholding and superannuation. 
 
“We have the situation whereby for pay-roll tax purposes certain payments to contractors can be wages in one state but not another so the drain on businesses trying to get it right is enormous,” Mr Noroozi said. 
 
Another quirk of legislation across the country is the lack of a ‘standard principal place of residence’ test. 
 
“We have the unfortunate situation where the definition of ‘main residence’ differs in every piece of Commonwealth and State legislation despite the fact this test is used for assessing a host of taxes and grants including the NSW first home owners grant, Commonwealth Capital Gains Tax, and various state land taxes,” Mr Noroozi said. 
 
In the 2005 federal budget the Institute said it is also looking for major reform and review of the GST. 
 
“GST legislation is badly written and ambiguous. It has been in place since 1 July 2000, and a review to ensure that the GST provisions are achieving their original stated objectives is overdue,” said Mr Noroozi. 
 
The Institute’s policy also says there are instances within GST laws that allow the potential for double taxation or where an inequitable amount of GST payable arises and these must be removed. 
 
In addition the policy also recommends that, as a long term measure, GST should be levied on food items and that compensation for the disadvantaged should not be provided through the indirect taxation system. “The exclusion of food from GST greatly increases the complexity of the administration process thereby increasing the costs to business,” Mr Noroozi said. 
 
To offset the effects of GST on food for low income earners the Institute says a refundable tax credit, like the Canadian system could be used or the additional revenue earned from GST on food could be used to compensate-low income earners for their increase in food bills. 
 
The Institute said it also wanted action from the state governments on indirect taxes. 
 
As part of the intergovernmental agreement which brought in the distribution of GST revenue to the states they were required to look at abolishing certain stamp duties including those on non residential conveyances, leases, mortgages, credit arrangements and unquoted marketable securities. 
 
Most states have now agreed to phase out the majority of these stamp duties by 2010/11 but the Institute says that timeframe is too long and that they should all be abolished well before that time. 
 
“No justifiable reason exists for delaying the abolition of these duties until the 2010/11 financial year due to the increased revenue they have received from the GST,” Mr Noroozi said. 
 
Another long term recommendation is for the states to investigate ways to phase out payroll tax, which is a disincentive to employment. 
 
In summary the 10 recommendations of the paper are:

• Complete Removal of Some Existing Duties as Promised 
  
• Standardisation of Federal and State Taxes 
  
• Standardise Principal Place of Residence Tests 
  
• Remove Taxes on Taxes: Stamp Duty on GST 
  
• Remove Double Taxation within GST 
  
• Refine and Reform GST Laws 
  
• Review to Be Undertaken in Relation to the Self-Assessment of Indirect Taxes 
  
• Review the GIC 
  
• Abolition of Pay-Roll Tax 
  
• Impose GST on food items