Taking chair on tax reform

2 September 2009

Professor Michael Dirkis speaks to the Higher Education supplement of The Australian on his appointment to the Sydney Law School.

Taking chair on tax reform

Stephen Marchett, The Australian, 2nd September 2010

MichaelDirkis has built a career on a great Australian paradox. We are enormously aware of tax as a policy issue, something that started when Paul Keating put economics at the centre of the political stage, Dirkis says. And yet we are terrified of the annual return; 73 per cent of us pay an expert to fill in our forms.

"We are scared of its complexity. Most people can drive but don't understand cars. It's the same for tax," says Dirkis, who leaves the Taxation Institute of Australia next month to take up a chair at the University of Sydney.

Tax law is a relatively new discipline, he believes, but one that will grow as the country considers the Henry report on tax reform at the end of the year and new issues arise, notably the tax treatment of emissions trading.

"There are estimates that in the first year of operation the carbon pollution reduction scheme will raise $13billion from the price of permits. European experience shows the derivative market turnover multiplier is a factor of 10 - no wonder the bankers are excited," he says. "Now that the US is going with a CPRS, it is what we will get and we will see a new finance industry - something akin to stockmarkets in permits all over the world."

According to Dirkis, the challenge is to ensure tax law keeps up with the finance industry; this will drive accounting and legal practices to invest in upgrading skills. Which means the times will suit academics such as him, who took up tax law in the same way the system developed, almost accidentally: "I was a science student who drifted into accounting, and the public service sent me to work at the tax office."

During his 11 years there he took degrees in law before moving to the Taxation Institute of Australia and completing a PhD on the law of residency and how international earnings are taxed.

It is an area that demonstrates the overall state of the system. The tax treatment of residency was developed in the 1930s and has built up over time without any systematic reform. "There are 20 definitions of residency in the law," Dirkis says.

He has high hopes for the Henry review, pointing to the involvement of tax law researchers in its work.

And research into tax reform has productivity potential. "In the past we changed tax law but didn't reform it. If reform is done properly to reduce complexity and the waste of human resources it can make the economy more competitive."

Contact: Greg Sherington

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