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Published online by Cambridge University Press: 24 January 2025
The issue of simplification of taxation law has been an important part of the fiscal agenda in Australia since the establishment of the Tax Law Improvement Project (TLIP) back in December 1993. The TLIP, which aimed to simplify income tax legislation embodied in the Income Tax Assessment Act 1936 (Cth) through the use of shorter and clearer sentences and the use of plain English, was conceived in response to widespread criticism that the income tax legislation was difficult to read and understand.
It has been contended that this inherent difficulty in understanding income tax legislation due to the length and complexity of the legislation led to increased costs, both for the taxpayer in the form of increased tax compliance costs, and for the Federal Government in the form of increased tax administration costs. The TLIP's role was to rewrite the primary income tax legislation which culminated in the development of the Income Tax Assessment Act 1997 (Cth).
1 Hereafter referred to as ITAA36.
2 Commonwealth of Australia, Reform of the Australian Tax System Draft White Paper ('Draft White Paper') (1985), 9.
3 Hereafter referred to as ITAA97.
4 Indeed, the TLIP style of drafting was supposed to inform and be applied in all taxation drafting thenceforward.
5 See, eg, Ross Stitt, 'GST and Financial Service' (2001) 4 The Tax Specialist 236; Peter Edmundson, 'GST and Financial Supplies: A Comparative Analysis of Legislative Structure' (2001) 30 Australian Tax Review 132.
6 Adam Smith, The Wealth of Nations (first published 1776, 1904 ed). Smith explained tax simplicity as: '… the tax which each individual is bound to pay ought to be certain, and not arbitrary. The time of payment, the manner of payment, the quantity to be paid, ought all to be clear and plain to the contributor, and to every other person. Where it is otherwise “the taxpayer” is put more or less in the hands of the tax gatherer'.
7 David Smith and Grant Richardson, 'The Readability of Australia's Taxation Laws and Supplementary Materials: An Empirical Investigation' (1999) 20 Fiscal Studies 321.
8 Lin Mei Tan and Greg Tower, 'The Readability of Tax Laws: An Empirical Study in New Zealand' (1992) 9 Australian Tax Forum 355.
9 Maryann Richardson and Adrian Sawyer, 'Complexity in the Expression of New Zealand's Tax Laws: An Empirical Analysis' (1998) 14 Australian Tax Forum 147.
10 Hereafter referred to as the GST Act.
11 Smith and Richardson, above n 7, 330 2.
12 Draft White Paper, above n 2.
13 Graeme Cooper and Richard Vann, 'Implementing the Goods and Services Tax' (1999) 21 Sydney Law Review 337, 340.
14 Bin Tran-Nam, 'Assessing the Revenue and Simplification Impacts of the Government's Tax Reform' (1999) 2 Journal of Australian Taxation 329, 329.
15 Joint Committee of Public Accounts, Parliament of Australia,An Assessment of Tax: A Report on an Inquiry into the Australian Taxation Office (1993).
16 Smith and Richardson, above n 7, 325.
17 Melbourne Institute, Tax Reform, Equity and Efficiency (1998) 43.
18 See for example, Cedric Sandford, 'Goods and Services Tax: Minimising the Compliance Costs of a GST' (2000) 3 The Tax Specialist 247, 249.
19 Ross Guest, 'The GST Package: Has the Senate Resolved the Controversies?' (1999) 2 Journal of Australian Taxation 419.
20 Simon James and Ian Wallschutzky, 'Tax Law Improvement in Australia and the UK: The Need for a Strategy for Simplification' (1997) 18 Fiscal Studies 445.
21 John Wickerson, 'Measuring Taxpayer Compliance: Issues and Challenges Facing Tax Administrations' (1994) 11 Australian Tax Forum 1, 12.
22 Edgar Dale and Jeanne S Chall, 'A Formula for Predicting Readability' (1948) 27 Education Research Bulletin 11, 37.
23 Ibid.
24 Smith and Richardson, above n 7, 328.
25 Rudolph Flesch, 'A New Readability Yardstick' (1948) 32 Journal of Applied Psychology 221.
26 Tan and Tower, above n 8, 361; Bruce Koch and Stewart Karlinsky, 'The Effect of Federal Income Tax Law Reading Complexity on Students' Task Performance' (1984) 2 Issues in Accounting Education 98.
27 Graeme Cooper, 'Themes and Issues in Tax Simplification' (1993) 10 Australian Tax Forum 417, 424. Apart from 'clarity of expression', Cooper also argued that the conception of simplicity is represented by elements of predictability, proportionality, consistency, compliance, administration and co-ordination. Furthermore, Cooper also asserted that complexity can be found at four different levels of a taxation system. The first level is in the 'choice of the tax base'. The second level is the 'design of the rules' to be applied to the tax base. The third level relates to the 'expression of those rules'. Finally, the fourth level of complexity is related to the 'administrative requirements' imposed on taxpayers.
28 George Klare, 'Readability' in P David Pearson (ed), Handbook of Reading Research (1984) 681.
29 See for example, Phillip M J Reckers and A J Stagliano, 'State Income Tax Forms: A Test of Readability' [1980] Akron Business and Economic Review 42, cited in Tan and Tower, above n 8, 361.
30 Tan and Tower, above n 8, 361.
31 Beverly Zakaluk and S Jay Samuels, 'Toward a New Approach to Predicting Text Comprehensibility' in Beverly Zakaluk and S Jay Samuels (eds), Readability: Its Past, Present, and Future (1988) 125; Tan and Tower, above n 8, 361.
32 Tan and Tower, above n 8, 362.
33 John Courtis, 'Annual Report Readability Variability: Tests of the Obfuscation Hypothesis' (1998) 11 Accounting, Auditing and Accountability Journal 459.
34 Colin Harrison, Readability in the Classroom (1980) 77. Moreover, Harrison contended that while it is theoretically possible to produce scores that fall outside the range of 0 to 100, in practice, such scores are infrequent.
35 George Klare, 'The Formative Years' in Beverly. Zakaluk and S Jay Samuels (eds),Readability: Its Past, Present and Future (1988) 20.
36 See, eg, George England, Margaret Thomas and Donald Paterson, 'Reliability of the Original and the Simplified Flesch Reading Ease Formulas' (1953) 37 Journal of Applied Psychology 111; Patricia Hayes, James Jenkins and Bradley Walker, 'Reliability of the Flesch Readability Formulas' (1950) 34 Journal of Applied Psychology 22.
37 John Gilliland, Readability (1972).
38 Harrison, above n 34, 77.
39 Richardson and Sawyer, above n 9, 159. It should be noted that Richardson and Sawyer were questioning the accuracy of earlier versions of word processing packages, not Microsoft Word 97.
40 This procedure was also undertaken in Smith and Richardson, above n 7, 328.
41 Harrison, above n 34, 77.
42 See Courtis, above n 33, 470.
43 Tan and Tower, above n 8.
44 Richardson and Sawyer, above n 9.
45 Robin Woellner, Simon Gaylard, Margaret McKerchar, Michael Walpole, Cynthia Coleman and Julie Zetler, 'Once More into the Breach … A Study of Comparative Compliance Costs under the 1936 and 1997 Acts: Progress Report' in Chris Evans and Abe Greenbaum (eds), Tax Administration: Facing the Challenges of the Future (1998) 195.
46 Smith and Richardson, above n 7.
47 Ibid 330–3.
48 Harrison, above n 34, 111.
49 Smith and Richardson, above n 7, 329.
50 J P Kincaid et al, Derivation of New Readability Formulas (Automated Readability Index, Fog Count, and Flesch Reading Ease Formula) for Navy Enlisted Personnel (Branch Report 8-75, Chief of Naval Training, 1975).
51 Harrison, above n 34, 109. Furthermore, it is reasonable to expect that that the reading ability of Australian and US students is approximately the same, all else equal. This would mean that if a document receives a score of eight on the F-KGL Index, a 14–15 year old Australian should be able to read and understand the document.
52 A comprehensive list of the empirical results obtained for the GST sections analysed for readability appears below as an Appendix.
53 See, eg, Stitt, above n 5; Edmundson, above n 5.
54 Smith and Richardson, above n 7, 331.
55 Ibid.
56 Ibid 336–7.
57 Ibid 341–6.
58 See the Appendix below.
59 The maximum F-KGL possible in the computer program used was 12.
60 Smith and Richardson, above n 7, 330.
61 Richardson and Sawyer, above n 9, 175.
62 Tan and Tower, above n 8, 370.
63 Richardson and Sawyer, above n 9, 170.
64 Smith and Richardson, above n 7, 332.
65 See Sandford, above n 18, 247.
66 Adam Smith, above n 6.
67 Smith and Richardson, above n 7, 341–6.
68 Ibid.
69 Ibid 330.
70 See Cooper and Vann, above n 13, 435.
71 See Sandford, above n 18, 248.
72 See Cooper, above n 27, 424.
73 Courtis, above n 33, 459.