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Taxpayer Compliance

22.79. Any system of direct taxation relies heavily on the general acceptance of the system by those required to pay the levy and on the rendering of true returns. Legislation imposing taxes normally provides for additional imposts for incorrect and untrue returns or statements and failure to supply returns or information on time; and there are Court processes for prosecution in these instances. Like the taxation authorities of many other countries, the Taxation Office maintains on its staff officers whose task is to audit and examine the returns of taxpayers to detect inaccuracies or deception. In the opinion of the Committee this audit activity is essential. There is merit in extending it to the greatest possible number of taxpayers and giving it maximum publicity.

22.80. Elsewhere in this Report the Committee has proposed the introduction of a capital gains tax, measures for dealing with income splitting and ways of tightening up on the taxation of gifts of property. These recommendations relate mainly to capital transactions which will require the disclosure to the Commissioner of relevant information. In order that the Commissioner can properly administer provisions to this effect and also to assist in the general administration of income tax, estate duty and gift duty laws, the present requirements to supply balance sheets or statements of assets and liabilities with income tax returns should be enlarged.

22.81. At the present time balance sheets or statements of assets and liabilities must be furnished with each income tax return of a company, a superannuation fund, a partnership in business and certain trust estates. The Committee recommends that these requirements be extended so that a balance sheet or statement of business assets and liabilities is also supplied with each income tax return of a taxpayer carrying on a business or profession; all trust estates and partnerships should be included too.

22.82. A standard form of balance sheet or statement of assets and liabilities should be issued by the Commissioner for completion and forwarding with returns other than company returns. The form should also provide for the supply of associated


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information required by the Commissioner, such as movements in capital accounts of taxpayers in business.

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