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Tax Faculty warns of system 'falling into disrepute'

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11th Apr 2005
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The ICAEW's Tax Faculty has warned that substantial parts of the Finance Bill have been enacted "without any scrutiny at all" and its chairman has declared that last week's events increase "the fear that the tax system itself is falling into disrepute due to the lack of any democratic checks and balances".

Finance Act 2005 has been published and is available on the HMSO website.

The major tax bodies have expressed disquiet in recent weeks at the prospect of complex anti-avoidance measures being enacted without adequate scrutiny in Parliament. While many such measures contained in the original Bill were dropped, some were retained and have now become law.

The ICAEW's Tax Faculty has now said it is "concerned that due to the impending election the Government has now rushed through more than 200 pages of the Finance Bill in an afternoon Parliamentary session of some four hours on Wednesday 6 April".

"The process was apparently agreed with all the main opposition parties," it added.

On 31 March the faculty wrote to the Paymaster General "expressing concern that the whole of what was then a 340 page Finance Bill would be rushed through Parliament, without the time needed for proper consideration".

The faculty said then: "We are strongly of the view that if the provisions in the Finance Bill are not subject to appropriate Parliamentary scrutiny then this will be to the detriment of UK business and will undermine confidence and trust in the Parliamentary process."

But during last week's four-hour House of Commons debate on the 200-page Finance (No 2) Bill 2005, introduced the day after Tony Blair called a general election for 5 May, Michael Fallon MP declared that "given today's situation ' we must take the wording of the clauses on trust".

"' We are setting a bad precedent by passing so much legislation on to the statute book without proper scrutiny," he added.

The House of Lords approved the Bill in around half an hour on 7 April. Baroness Noakes, formerly Dame Sheila Masters and a former president of the ICAEW, claimed that shadow chief secretary to the Treasury George Osborne had resisted an attempt by the Chancellor to retain the original Bill of 172 clauses and 20 schedules.

She said: "We still have 106 clauses and 11 schedules, but my honourable friend has, in particular, saved the nation from some highly complex anti-avoidance legislation being passed without any parliamentary scrutiny or without the opportunity for outside bodies to contribute to the debate."

For the Government, Lord McIntosh insisted that what was left out of the Bill and what remained was agreed by the opposition parties. He pointed out that four days of debate on the Budget "covered a large part of the issues we would be expected to consider".

'Disrepute'
The Tax Faculty said on 8 April: "The normal convention when an election is called early in the fiscal year used to be to introduce a shortened Finance Bill incorporating only those revenue raising measures required to ensure that the Government could go on functioning during the subsequent month or so before a proper Finance Bill could be introduced in the new Parliament. For instance in 1992 the Finance Bill had a mere 12 clauses, compared with 106 in this year's Bill.

"It would appear that the present Government was intent on enacting the whole 340 pages of the original Finance Bill until they met serious opposition from the Tax Faculty and from other quarters. A substantial part of the original Bill has been enacted without any scrutiny at all. And we are also left with problems in relation to the other provisions as well.

"The provisions that were not enacted cannot now be discussed by the Civil Service until Parliament reconvenes in May. This is causing uncertainty about the tax effect of proposed transactions and we have evidence that transactions are not taking place because of this uncertainty."

Faculty chairman Mark Lee said: "All pretence that tax legislation is subject to effective parliamentary scrutiny would appear now to have gone. Five years ago when we published our ten tenets for a better tax system we feared the tax system was spiralling out of control. This latest development increases the fear that the tax system itself is falling into disrepute due to the lack of any democratic checks and balances.'

The faculty added: "No-one knows who will be the next party of Government. What is certain is that there are several hundreds of pages of legislation, put aside from the original Finance Bill, which will be waiting to be enacted when Parliament reconvenes.

"The Tax Faculty urges that lessons should at last be learned from the current sorry saga and whichever party is in power should take seriously their duty to enact legislation which is subject to appropriate scrutiny and debate and whoever is Chancellor upholds the heritage of their famous predecessor, James Callaghan, and seeks to introduce legislation which will stand the test of time."

Andrew Goodall
Editor, TaxZone

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By AnonymousUser
11th Apr 2005 22:47

Sometimes....
I have to pinch myself and make sure that I am still in England.

The ruling party has a de facto country president. This president seems to encourage voting practices that ensure that the ruling party is voted for regardless of the reality.

The 'checks and balances' seem to be overridden and what the president wants the president gets regardless of due process. Bad laws are passed without scrutiny.

I seriously wonder sometimes if I have woken up in the wrong country.

Sometimes I dream of a land with a parliamentary democracy where elected representatives examine legislation for both sanity and enforcability before after due process passing it into law. A land where international law is respected. A land that does not arbitrarily declare war on other countries. A land where the citizen and not the state is in control of his destiny.

Well, a man can dream...

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By AnonymousUser
11th Apr 2005 12:27

The Chosen One
Why the panic?????????????
We all know that GB has decided that he is "The Chosen One" going to do whatever HE feels is RIGHT (regardless of anybody or any body)to extract as much revenue as he can to pay for TB investment program. So lets not look surprised when he "carries on regardless".

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