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Cameron gets tough on red tape… again

29th Jan 2014
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Prime minister David Cameron has got a bee in his bonnet about business regulation and tax avoidance. But John Stokdyk feels like he’s heard it all before.

Let’s look back at a busy few days for the prime minister, who flew out to Davos late last week to tell political and business leaders at the World Economic Forum how to revive their economies the way he has so successfully done in the UK.

After a quick chinwag in which he took on Bono about tax avoidance and insisted that companies pay their “fair share”, Cameron was back in the UK on Monday to trumpet the coalition government’s achievements at reducing red tape.

Business regulation and tax avoidance seem to be topics the prime minister turns to when he’s feeling uncomfortable. In spite of optimistic news on the economy, which recovered significantly in 2013, the coalition has drifted in the past few months with Labour scoring some clever tactical points by anticipating embarrassing announcements and picking on easy targets such as greedy energy companies and bonus-happy bankers.

It doesn’t help that much of the economic boom stems from the Help to Buy scheme that has lived up to predictions that unleashing a new stream of government-guaranteed loans would end up fuelling a housing boom that would just repeat the flaws of the 2002-7 boom rather than rebalancing the economy away from its dependence financial speculation. And while the banks and energy companies are getting richer, the Chancellor seems to be ignoring the forecasts he quoted in December and continues to insist that austerity will be his priority for the foreseeable future.

Labour has hit back by pointing out that the real standard of living is still falling for many people and used this as an argument to bring back the 50p income tax rate - the one that George Osborne put down to 45p in 2012.

This provided the opening for Cameron’s carefully co-ordinated counter-offensive. Egged on by business lobbyists who criticised Labour for being anti-business, Cameron brushed the dust off his Red Tape Challenge and found some 3,000 regulations ripe for redundancy.

The Department of Business Innovation and Skills (BIS) followed up with a raft of business-friendly initiatives, including the £30m Growth Voucher scheme announced by the Chancellor in his autumn statement.

Back to where we started: the Business Link network has been disbanded, rightly pensioned off in a shift to online support in the shape of a no-nonsense GOV.UK revamp. Now the voucher scheme has essentially resuscitated the model of subsidised local advice, but delivered this time by the new, net-savvy Enterprise Nation network rather than the hapless old Business Link consultants.

On tax avoidance, Cameron asserted his leadership in the field by telling the WEF he was on top of tax transparency and beneficial ownership. Almost at the click of his finger, the Treasury responded with draft legislation advancing disclosure rules on tax schemes and pre-emptive payments and potential penalties to those who attempted to claim deductions under avoidance schemes that get struck down at tax tribunals.

This is actually tricky, messy stuff that had to be held over from December’s raft of draft Finance Bill clauses. The government is also taking little heed of outside advice or interference as it pushes for a much more prescriptive environment for those who attempt to exploit the flaws in the tax law the government itself enacts.

Whatever the specific merits of the latest raft of anti-avoidance measures, they are certainly not simple, and require nearly 100 pages of legislation to explain. For some reason, the red tape bonfire doesn’t include tax legislation, which is a pity, since even the prime minister admits that the volume and complexity of tax law is one of the underlying reasons why avoidance schemes are so rife in this country. Simplification is a long-term project that seems to have stalled after some brave initiatives announced in the aftermath of the coalition’s formation.

For all the prime ministers activity this week, it’s a pity that his intermittent ministerial attention doesn’t translate into sustainable policies. And before anyone accuses me of political bias, I used to say exactly the same thing about Tony Blair, from whom Cameron seems to have borrowed his “Grab a headline with the announcement, don’t worry about the actual policy” methodology.

Sadly Ed Milliband seems to be adept at playing the same game. The outlook for effective business support and tax simplification/anti-avoidance strategy does not look good.

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By dialm4accounts
31st Jan 2014 14:40

Radical tax simplification is crucial

"For some reason, the red tape bonfire doesn’t include tax legislation, which is a pity, since even the prime minister admits that the volume and complexity of tax law is one of the underlying reasons why avoidance schemes are so rife in this country. Simplification is a long-term project that seems to have stalled after some brave initiatives announced in the aftermath of the coalition’s formation."

​The UK's tax system is a vast wilderness of complex and outdated rules.  Make the PM, the Chancellor, and Treasury staff spend a year working in an accounting practice doing small business tax returns.  Then they would soon radically simplify the tax system.

M

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