That is tax administrative practice, not tax law. The two are different problems with different solutions.

Taking the example of work clothing from an earlier thread, I believe that the exact distinction between which clothing can be claimed as a deduction and which can’t be claimed, under various circumstances are the result of internal ATO decisions. At least, I don’t believe that such things ever went though parliamentary debate.

Are the fine distinctions of deductibility the crux of taxation? From the punter’s point of view they probably are. From a government’s point of view they are nothing more than a nuisance.

The driver of complexity is equity.

We almost agree, I just feel the need to insert the words “appearance of” into the above statement.

Tax Law contains delegated authority and internal decisions made by the ATO. Sadly these never see public debate, although some of them are attached to political events at the time

That is tax administrative practice, not tax law. The two are different problems with different solutions.

The objective in doing this is to ensure that no one really understands it so, no one knows specifically what to complain about or in what way they are getting less than the next guy.

This is nonsense. The driver of complexity is equity. In the desire to close the loopholes, we end up with complex legislation. The problem really is that easy. The solution obviously is not, although financial statements-based taxation is not a bad idea (since it fundamentally reverses the traditional incentives: normally paying less tax enhances earnings, but if you are taxed on your accounting earnings, well it is very hard to convince your board to depress earnings so as to pay less tax!!).

At the least it would need to factor in cases. That can certainly be done, though, and the result might be quite interesting.

But then it will have a massive bias towards ‘age’.

See an introduction here at VisualComplexity.

Get the code from taxmap.org.

So…. when politicians claim to simplify the tax code, perhaps they can look at (and give us) before and after pictures of their proposals…. BEFORE they implement them.

Give lawyers and legislators access to parametric macro expansion, recursive function calls, application specific meta-languages, variable substitution, pointer arithmetic and parser and compiler technology, think of the disaster they could achieve!

I think that rule-complexity expands to fill the space provided (just like software), so we run the tax system at the highest possible complexity that can be achieved with the resources at hand. The objective in doing this is to ensure that no one really understands it so, no one knows specifically what to complain about or in what way they are getting less than the next guy. A sufficiently complex legal system ensures that full compliance with the law is impossible, almost certainly the law contradicts itself in many places, and thus we generate a haze of confusion under which we practice selective enforcement.

A veneer of benevolent legal regimentation covering a core of discretionary on the spot judgement — the best of all worlds. Remember the simple mantra: legislate broadly, enforce selectively.

Douglas Adams was secretly describing the legal system when he said that if anyone anywhere understood both the Ultimate Question and the Ultimate Answer in the same place at the same time, then the universe would be destroyed and replaced with something even weirder. Probably this process has already happened many times. It is an arms race of sorts, attempting to consume all of the opponent’s information processing capability before you run out yourself. Not unlike cryptography.

By the way, Common Law already has a system of linking to precedents so any particular judgement chains back to all of the original decisions implicated in that judgement. Statutory Law is generated by a series of modifications to existing statutes (what code-heads call “deltas”) each of which is debated in parliament. All of the necessary information is available to link any particular statute back to the people who wrote the statute, the time is was written and the arguments both for and against (a suitable version controlled database in electronic format might already exist if you pay enough to the right people, or one of us could be the first to compile such a thing).

Tax Law contains delegated authority and internal decisions made by the ATO. Sadly these never see public debate, although some of them are attached to political events at the time. I fully support any attempts to improve transparency of this ATO process, which could easily be done with sufficient political motivation.

While on the subject, we could try to get governments to release their budget papers in a manner that actually adds up. I mean, as full tree of accounts and sub-accounts where the total from the sub-account becomes the line-item in the next step up the hierarchy (every figure should be printed twice, except the final total). Better still to have proper nested account codes. I would expect that treasury would have to run something like this internally, but I’ve never seen it published. Maybe there are insiders reading this who can explain why.

I struggle to see how that data could even be collected let alone rendered comprehensible.

That’s where expertise in data gathering, management and mining comes in. Off the top of my head, a taxonomy of different causes, a taxonomy of mechanism types, enforcement regimes, agencies etc.

This data all exists in various semi-structured forms. Structuring it is not actually the hardest part. It’s just tedious.

1) US has them, but no-one in their right mind would propose imitating US tax system unless they had US economy and financial markets.

2) That is not just you, but it certainly isn’t many ‘very rich’ either!

DD, all good points, but GST is a great example of where those goals are really mangled by the present system. It isn’t that hard to work out who is poor, so the GST should just be universal and then poor people should be compensated through a direct transfer.

Finally, invariably these days we are supposed to get rid of bugs through ‘principles-based drafting’ and other such EU-inspired crap. If anyone who actually knows how massively the EU has broken domestic taxation for its member countries and still thinks we should copy them, well, I for one would be surprised.

At any rate, it seems a bit silly – surely the vast majority of us who earn income in the tax brackets that are over the corporate rate do pay all our tax. Or is that just me…

Yes, simplicity usually means avoidance is much harder (that, for instance, is why we have a single rate of GST when theory indicates different rates for differing goods would reduce the costs to the economy of raising the revenue). But the trouble is that some tough tradeoffs then have to be made against other goals, such as minimising those economic costs or improving fairness. Proponents of flat tax systems (that is, one single rate of income tax) sell the elimination of most tax arbitrage as a major plus – which it is, but you then have to worry about other things such as taxing poor people as much as rich people (which not everyone thinks is a Good Thing).

I suspect such tradeoffs of reliability/simplicity versus other goals are common in high-level software design, too. As Einstein said “things should be made as simple as possible – and no simpler”.

Suppose for a moment that the tax law had traced links to and from its clauses, to its applications and its justifications.

My first guess is that history notes and EMs are a bit like this already?

But if you mean practical applications, well, I struggle to see how that data could even be collected let alone rendered comprehensible.

Apart from quickies like ” Thus spake the master programmer: ‘You can demonstrate a program for a corporate executive, but you can’t make him computer literate.’”, the following is pertinent:

There was once a programmer who was attached to the court of the warlord of Wu. The warlord asked the programmer: "Which is easier to design: an accounting package or an operating system?"

"An operating system", replied the programmer.

The warlord uttered an exclamation of disbelief. "Surely an accounting package is trivial next to the complexity of an operating system," he said.

"Not so," said the programmer, "when designing an accounting package, the programmer operates as a mediator between people having different ideas: how it must operate, how its reports must appear, and how it must conform to the tax laws. By contrast, an operating system is not limited by outside appearances. When designing an operating system, the programmer seeks the simplest harmony between machine and ideas. This is why an operating system is easier to design."

The warlord of Wu nodded and smiled. "That is all good and well, but which is easier to debug?"

The programmer made no reply.

And given the loopholes always being found in legislation and regulations (which is really, a set of instructions and therefore a program), it’s pretty obvious politicians and most regulators haven’t heard of the “Law of Least Astonishment” (look it up in the op cit).