Making tax policy: Why the rush?

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.

Continued...

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Comments
bookmarklee's picture

CIOT and ICAEW Tax Faculty

bookmarklee | | Permalink

I think you're being untypically and unduly harsh Simon in suggesting that responses from the professional bodies would be focused on "the needs of big business".  They rarely have been to date. Most in-house staff and volunteers who contribute to such responses are normally focused much more on the typical taxpayer and small business. Indeed they tend to just like you and your contributions would be just as welcome as those of members I'm sure.
 

The short timescales are just as much a problem for the professional bodies as for anyone else - even worse in fact. The reason being that views and input needs to be collated from across the volunteer base before responses can be finalised and submitted. Often a relevant committee meeting or two needs to be factored into the process as well.

Mark

cymraeg_draig's picture

Bias against small practices and against the north.

cymraeg_draig | | Permalink

Just as self employed people and small businesses are the backbone of the economy, the small accountancy practice (often operating from the spare room of the home) is the backbone of the accountancy profession. 

These are the people who are in daily contact with ordinary sole traders and small businesses, and these are the people whose views should be actively sought.  The professional bodies are London based and show a distinct bias towards large practices located in the south. 

Similarly the tax system is "southern biased" in that the same tax rates apply across the country, but, income levels are generally lower as you move north, and government spending from taxes is certainly higher per head of population in the south. 

Of course lower incomes mean lower income tax bills, but, indirect taxation such as petrol tax is the same, and therefore a higher percentage of income in the north.  

There really is a vgrowing north-south divide, and everyone north of Watford resents it.

bookmarklee's picture

Curious as to the rationale for that perception

bookmarklee | | Permalink

"The professional bodies are London based and show a distinct bias towards large practices located in the south."

That's not my experience and I've been closely involved for over ten years. I still sit on a number of working parties and committees for ICAEW.  I would accept that membership of these has a southern bias (due to logistics). However neither the Personal Tax and Finance Committe nor the SME Business tax committee have a large firm bias - quite the contrary in fact.  And the same is true for almost all of the ICAEW tax committees (I can't comment re CIOT as I only sit on working parties there).  Having checked it seems that even on the Large Business and International Tax Committee the reps from the top ten accountancy firms are in the minority.

And, just to be clear, it is my experience that the majority of active contributors to representations are often found among active members who run their own smaller practices.  Indeed, the ICAEW relies on such input to ensure that its representations reflect the experiences of those who are dealing with the vast majority of SME businesses in the UK.

Mark