THE NEW “OPTION 2”? THE HENRY REVIEW’S BROAD BASED CASH FLOW TAX
By Michael Walpole
This article critiques the cash flow tax proposed in the Australia’s Future Tax System Review (the Henry Review)(the proposed tax on financial services is covered elsewhere). The author recognises several attractions of the cash flow tax, principally the lower compliance costs associated with ‘automation’ of processes and the removal of the need to identify actual transactions. But concerns are expressed about the cash flow tax such as the risk of underreporting, the risk to Australian Double Tax Agreements by removing income tax on business and adopting a system that is not well recognised internationally.