The government says it wants to create stability and predictability in the tax system, but is the way tax law is made conducive to this? Simon Sweetman offers his assessment.
In June HM Treasury produced a discussion document called Tax policy making: A new approach.
If the end of tax policy is legislation, which it normally is but does not have to be (an aim could be, for instance, the removal of legislation), then the usual complaints are:
- There is too much of it - that is probably accepted all round, and every government always comes in determined to do it less, and every government ends up doing it more. Some of it is driven by avoidance, some of it by sloppy drafting first time round, some by perceived problems – and even when (like with IR35) it seems to be ineffective, getting rid of it is far harder.
- It is written too quickly, with very little time between bright idea and legislation.
- It is not properly consulted on, because there is never the time to do it and because chancellors really love pulling a rabbit out of their hat, with the ‘wow’ factor outweighing any long term thinking.
- It is not properly scrutinised by parliament because there is not enough time between Budget and Finance Act, and because very few MPs actually understand what they are looking at and why.
Most of the problems come down to the very short timescales. The last government appeared to make gestures in this direction and certainly there is far more consultation than there was (even if it is sometimes rushed), but this was defeated by the sheer weight of legislation.
Now we have a new approach. The government says it wants predictability, stability and simplicity for the tax system. Fine - that’s what small business wants as well. It may also be what large avoiders want, but there might be ways to deal with that.
It all sounds good, but the government's new approach was followed by a rush of discussion documents on important subjects and a timescale that would have been tight even if it didn’t include the summer holidays. Yes, the big accountancy firms will be able to digest and respond, and the ICAEW and the CIoT are likely to manage. However, us peasants need to be able to get our word in too. After all, we don’t want tax consultations that only take the needs of big business into account.