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Government unveils new tax policy approach

9th Dec 2010
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The government has published proposals that set out the ways in which tax policy making will change following the latest consultation process.

According to newly published Treasury documents the proposals will add clarity and predictability to developing, legislating and implementing tax policy.

The government’s aim is to reduce the volume and frequency of changes to the tax code and provide greater predictability and transparency in plans for tax reform.

As part of this new approach, it will provide advance notice for key events in tax policy development. The chancellor has already announced that the Budget will be held on 23 March 2011 and the government has also confirmed that the Finance Bill 2011 will be published on 31 March 2011.

Following the June Budget proposals, the government has now set out the following five ‘concrete’ improvements:

  • Where the government is embarking on major areas of tax reform, it will set out its policy objectives and rationale for reform, building on the approach taken in the Corporate Tax Road Map.
  • Tax policies will be developed over a longer policy cycle. The majority of tax measures will be announced at Budgets for inclusion in the Finance Bill the following year at the earliest.
  • Government will use the period between the Budget and the Finance Bill to consult on proposed policy changes and draft legislation. The government has published a draft Tax Consultation Framework that outlines its approach to consultation on tax policy and legislation.
  • Government will take a more strategic approach to avoidance, and its response to significant avoidance risks will be balanced with improving predictability and stability in the tax system. The government has published a draft protocol setting out the circumstances in which it will announce legislative changes with immediate effect outside fiscal events. Acknowledging that anti-avoidance measures have increased complexity and contributed to frequent legislative change, it will also set out, at Budget 2011, a programme of work to review areas of the tax code which have been subject to repeated avoidance attempts.
  • When announcing changes to tax law, the government will ensure that it clearly sets out what the change is, why it is being proposed and what impact it expects this to have. It will do this through Tax Information and Impact Notes, the first of which have been published alongside the draft clauses intended for Finance Bill 2011.

While poring over the megabytes of new legislation and commentary, Tax Editor Rebecca Benneyworth gave a thumbs-up to the new approach. “What is new about this is that every single bit of legislation explains what it’s trying to achieve. That’s good,” she said.

The government is keen to reinforce the new approach by continuing with further consultation - that got underway in June - on the following:

  • Publication of Finance Bill clauses in draft and the way in which information relating to the draft legislation is communicated, including the new Tax Information and Impact Notes.
  • Draft Tax Consultation Framework.
  • Draft Protocol for announcing changes to tax law with immediate effect outside fiscal events.

To view the full documentation for the new approach to tax policy making, visit the HM Treasury website.


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