The annual Budget creates short-termism according to Derek Allen, the director of tax at the Institute of Chartered Accountants of Scotland (ICAS).
A longer-term approach and thinking would promote stability and certainty for taxpayers and businesses.
It would encourage governments to set a clear strategy for the taxation system and avoid the political temptation of an eye-catching announcement every year
If there is only one Budget every few years, changes to the taxation system outside that process may also attract a better level of scrutiny from MPs. At present, it is not realistic to expect many MPs to look in detail at 600 plus pages of legislation.
Any interim amendments to the tax system should be regarded as extraordinary in response to exceptional circumstances.
UK tax law is too complex and is incompatible with a Self Assessment regime where, in theory, taxpayers are expected to understand tax legislation.
In addition the annual Budget and Autumn Statement are far too politicised a process and has led to an ever growing volume of tax legislation. The aggregate effect is that responsible citizens find compliance with our tax laws confusing and expensive, and businesses and their advisers struggle to cope with the amount of red tape.
The elements of the ritual that tend to cause the most fuss for accountants is quite simply the time needed to be spent on keeping on top of endless changes in law and guidance.
The speech delivered by the Chancellor is merely the tip of the iceberg as the related papers to the budget generally run to encyclopaedic length.
Changes to proposals that have dominated coverage of the aftermath of the March Budget include the so-called ‘pasty tax’, relating to VAT charged on savoury snacks; proposals for VAT charged on static caravans; the exemption of charitable donations from a £50,000 tax relief cap and the freezing of a planned increase in fuel duty until the start of next year.
Some parties are still concerned over the amount of ‘u-turns’ taken since the March Budget, while others say it is a sign of a government that consults and listens.
In his Budget statement, the Chancellor said Britain would earn its way “With a simpler tax system, where ordinary taxpayers understand what they are being asked to pay.” The amount of change and tinkering that has taken place over the last few months just creates further uncertainty. It is difficult to square this call for simplicity with the 696-page amended Finance Bill [enacted on 17 July].
Governments must also recognise that there may well be unintended consequences of tax change. Groups not previously affected may find this to be the case as result of changes introduced. Government should not necessarily react to every pressure group.
The UK tax law is too complex and lacks stability. If government is serious about promoting a stable tax regime then annual change to the UK’s fiscal arrangements should be avoided unless it is vital for economic growth.