Jordon appointment is one to watch
THIS week I start by eating crow!
Last week, I said that behind Julia Gillard's mining tax (MRRT) was the flawed modelling of Treasury in all its maleness.
Untrue, I have since been informed. Treasury officials were actually locked out of the negotiations when the three tough South Africans representing Xtrata, Rio Tinto and BHP Billiton played Gillard and "Tonto" Swan for fools.
A major reason there has been just $129 million collected in six months against predictions and committed spending of $2 billion a year is that the big miners got dumb and dumber to agree to their amortising tenuously valued assets as an expense. So, sorry to men in general and treasury officials in particular for my slip.
Somewhat against the flow of bad decisions Labor has made since 2007 is the appointment of Chris Jordan as our next Commissioner of Taxation.
Potentially, at any rate, Mr Jordan's background as a former tax partner at KPMG augers well for a new period of empathy with business. As a practitioner, he would have been aware of the vice that his predecessors had closed on businesses using arbitrary interpretations of the complexities of the law to the point that the ATO had arguably become anti-small business.
The examples are too numerous to mention but how arbitrary is this? In calculating the net disposable surplus of a private company, the ATO disregards the reserves of the company as if they simply don't exist.
Anybody who has shares will know that the reserves of a listed company are 100% owned by the shareholders in pari passu, in proportion to the relative size of their shareholding. In other words, the cash value of the reserves are held in credit to the shareholders whether the reserves are in effect the rights to franked or unfranked dividends, the result of an unrealised revaluation of fixed assets or something else.
Of course these rights rank behind secured and unsecured creditors in the event of liquidation but while the company remains solvent, they are rock solid. So where does the ATO get off on ignoring an historical accounting principle when it comes to establishing the net value of a private, mum and dad company?
The reason they've done it is obvious - to rake in the bucks. The reason they get away with it seems equally obvious.
The institutes, practitioners and shareholders wave them through, refusing it seems to challenge the arbitrary definitions that increase the vice-like grip the ATO is creating by making proclamations that fly in the face of accounting principles.