Is our tax system perfect?
AccountingWEB's anonymous partner in practice anticipates stormy seas ahead for HMRC over the next few months and years.
I can’t believe that any reader will respond “yes” to the question used in the title.
If nothing else, they will have read numerous articles in this column and elsewhere on AccountingWEB suggesting that almost no element of the UK’s tax regime is currently fit for purpose.
However, there seem to be two or three influential men (and this one is gender-specific at the moment) who believe otherwise.
Unless my memory is playing tricks, when a new government is appointed one of the first things that it does is announce proposals to overhaul large swathes of tax legislation and operation.
While there has not been a change of government as such, when a new Prime Minister, Chancellor of the Exchequer and Chief Secretary to the Treasury with demonstrably different policies from their respective predecessors take office, I would have expected them to charge in fists flying with taxing proposals designed to make them look good, ideally improving the operation of a massively flawed and depressed department at the same time.
Instead, Boris Johnson, Sajid Javid and Rishi Sunak have been making bold statements about spending pledges but given no indication of having any thoughts or plans regarding any of our taxes.
Even worse in my eyes, those charged with overseeing HM Revenue and Customs have gone on record as stating that for the next three months (and presumably a much longer period after the fateful Halloween day) they expect staff to concentrate on preparations for leaving Europe rather than administering the tax code.
To date, the only publicly stated tax proposals from the new regime came from its head. Mr Johnson notoriously deciding that the only thing wrong with our tax system is the threshold at which higher rate tax should be paid. This will be increased from £50,000-£80,000, with some minor tweaks to National Insurance Contributions added into the mix.
I have to ask the question – is this blind-eye approach a tax avoiders’ and tax evaders’ charter? If the government does not wish to close any further loopholes, many of which allow the richest in society on both corporate and personal levels to make hay while the sun shines, the tax take is going to go down at a time when we need it to bolster the flagging economy.
If nothing else, one might have expected Mr Javid to understand tax avoidance strategy and its potential cost to the Exchequer given his former career as a senior Managing Director of Deutsche Bank, a company which implemented a highly artificial tax avoidance scheme that failed spectacularly in court.
One might also wonder whether those involved in the seamier side of the tax business might conclude that if large numbers of HMRC officers are tied up with Brexit business, this could be the perfect time to rob the economy blind.
More specifically, I would imagine that pretty much any inspector dedicated to VAT is going to be commandeered far away from their usual role of exposing wrongdoing.
I could be wrong, but I anticipate that HMRC is going to go through a rough time over the next few months and possibly years. Staff morale is at rock bottom the years and therefore cannot go any lower. However, more employees might decide to leave in despair or disgust, as their vocations are ignored in favour of new projects that may well fill them with little enthusiasm.
The need to address issues of tax simplification, avoidance and evasion more seriously might also be forgotten for years to come.
What will happen when we leave Europe, particularly if this happens in a peremptory fashion? Will we just chuck away all of the existing VAT legislation, reduce corporate tax rates to become a haven, conveniently ignore abusive tax avoidance by big players and hope for the best?
Who knows – quite possibly nobody including the Big Three mentioned at the start of this article.