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  ― 128 ―

Standard Deduction

9.70. A number of employment expenses of relatively minor significance for the vast majority of taxpayers are deductible under the general provisions of the Act. These largely relate to tools of trade, special clothing and its maintenance, and professional, technical and trade journals. The administration of the law in this regard involves considerable compliance and administrative costs which might be thought disproportionate to the revenue involved. Some taxpayers who are unaware of the available deductions or are unwilling to submit to the tedium of record-keeping do not obtain deductions to which they are entitled. Claims for deductions put the Commissioner to considerable trouble in verifying the amount of claims and whether they qualify.

9.71. In some countries, for example Canada and New Zealand, a standard deduction in respect of these items is given. The deduction, usually of modest amount, is allowed without proof of actual expenses and any further deduction is denied. In Canada's case the amount is 3 per cent of employment income up to a maximum of $150. There is considerable merit in this approach, though it must cause injustice to some taxpayers for whom the expenses are of more than minor significance. Both Canada and New Zealand have found it necessary to treat some classes of taxpayers more generously.

9.72. Were the Canadian and New Zealand approach adopted, it is likely that some occupations would seek to be excluded. It might be more realistic, therefore, to provide that the standard deduction be available but not obligatory: a taxpayer would still be allowed to itemise his claims. If a taxpayer chose to itemise, he would not be subject to the money limit on deductibility. At least some saving in compliance and administrative costs would be achieved.

9.73. The Committee recommends that an optional standard deduction against employment income be available. The amount of the deduction might be set, as in Canada, at $150 or 3 per cent of employment income, whichever is less. It will be necessary to specify the kinds of claims the standard deduction is intended to cover in addition to those listed in paragraph 9.70. The Committee does not contemplate that the standard deduction, if taken, would preclude the allowance of separate deductions for such expenses as subscriptions to trade and professional associations.

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