US Tax System – cut complexity to bring back trust in the system
The United States’ tax system is viewed as complex and less fair than tax systems in Singapore, Hong Kong and Canada, a global survey of tax professionals reveals by the Association of Chartered Certified Accountants (ACCA).
Called Perspectives on Fair Tax, the report surveyed finance professionals in Australia, Canada, Hong Kong, Singapore, the UK and the US, gauging their opinions on tax fairness, complexity, transparency and how well tax authorities communicate with their citizens.
The ACCA-commissioned research shows that US respondents believe current tax regulations in their country actually encourage evasion and non-payment of taxes.
Chas Roy-Chowdhury, ACCA Global Head of Taxation says: “ACCA’s research has found tax evasion can often be linked to a nation’s tax system having too many laws and regulations. Making the US’s tax system simpler could lead to a reduction of tax avoidance and tax evasion.”
The research also reveals an overwhelming support from all countries’ respondents to cut back on the volume of laws, directives and regulations to make tax systems less complex. But US tax professionals are clearly disappointed about how the Internal Revenue Service (IRS) communicates its regulations and rules with US citizens.
Roy-Chowdhury adds: “Again, respondents from Hong Kong and Singapore were most positive about their tax authorities and how they communicate, but the US and the UK languished at the bottom of the league table for this crucial issue.”
The US and the UK again came last when asked about whether their tax authorities communicated why certain taxes existed or why they were introduced.
Roy-Chowdhury says: “Tax payers – businesses and individuals - need to understand and trust their country’s tax system. It would seem that in the US this is not the case. This is a fundamental issue for all governments, to decide on a structure and purpose of a tax system and communicate that simply and with clarity to their tax payers.”
“Taxation revenue supports and pays for the basic functions of government. For as long as Americans don’t trust the system, compliance levels will fall. It is key that policy makers involved in tax planning do something about it now,” says Roy-Chowdhury.
Results of Perspectives on Fair Tax Report from ACCA:
• The US, UK and Australia ranked as having the most complex taxation system.
• The US was 4th in a league table of six when asked about the fairness of their country’s tax system. Hong Kong said their system was the most fair and simple.
• The US and the UK said their tax system was not transparent.
• The conclusion in the report says that “for a tax system to be perceived as fair by citizens, governments should strive to maintain a trusting constitution where citizens consider they have played a part in setting the system and that the system treats them with respect.”
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Notes to Editors
1. ACCA is the global body for professional accountants. We aim to offer business-relevant, first-choice qualifications to people of application, ability and ambition around the world who seek a rewarding career in accountancy, finance and management. We have 325,606 students and 122,426 members in 170 countries worldwide.
2. ACCA believes that globalisation of business requires one set of reporting standards. We favour principles-based, not rules-based standards, which is why we support the worldwide implementation of IFRS.
3. ACCA believes that tax systems should be transparent, simplified, fair and certain.
For further information please contact:
For further comment about global tax issues, please contact: Chas Roy-Chowdhury, ACCA Head of Taxation phone: +44 (0)20 7059 5976 / + 44(0)7710 707 516 e mail: chas.roy-chowdury@accaglobal.com
Helen Thompson, ACCA Newsroom phone: +44 (0)20 7059 5759 / + 44 (0)7725 498 654 e mail: helen.thompson@accaglobal.com