Review of Western Australian State Taxes 1994 - Chapter Eleven - Moral Exemptions
AbstractThis Chapter examines the underlying rationale and policy issues behind the exemptions for charitable institutions, religious bodies, educational institutions and owner-occupied family homes. The authors point out that moral exemptions do not conform to the principles of equity, efficiency and simplicity, as they narrow the tax base, are indirect in their impact and add to administrative costs. They may also lead to inequities if exempted organisations are allowed to compete with the private sector. They may also create distortion in resource allocation and may encourage systematic avoidance practices. As a consequence, it is submitted that it is inappropriate to assess moral exemptions using the equity, efficiency and simplicity criteria, as they are based on broader social and political grounds. The Chapter raises the possibility of replacing the exemptions with direct grants, but concludes that retention may be well justified by the desirability to preserve "human" and moral values in the face of the growing emphasis on economics and efficiency. |