Play Fair on Tax Policy, Says Treasury Select Committee
Posted on:
15
Mar
2011
by James Farmer
The Commons Treasury Committee has cautioned the Government that it has not done enough yet to set out the underlying principles for its widely-publicised new approach to tax policy making.
And, in a clear warning to the Inland Revenue, its “Principles of Tax Policy” document, released on 15th March, intimates that HMRC cannot expect to be above the law when it comes to enforcing one particularly contentious aspect of tax adjudication. Namely, the question of what is tax evasion and what is avoidance.
This is a critical question for many, at a time when a series on crackdowns on previously legitimate avoidance has aroused protests among accountants and advisers. Broadly, the document says that HMRC should ensure that its tax collection decisions should be clear enough not to require a resort to the courts in order to resolve a case in doubt.
And, conversely, that the law on tax should be simple and uncomplicated enough that a layman should be able to understand it – and that taxes should be cheap and simple to collect. The report makes it clear that repeated changes to the actual tax principles are counter-productive in this sense – not just in terms of taxpayer uncertainty, but also in purely economic terms.
The report recommends that future tax policy should:
· “be fair. The Committee accepts that not all commentators will agree on the detail of what constitutes a fair tax, but a tax system which is considered to be fundamentally unfair will ultimately fail to command consent.
· Support growth and encourage competition.
· Provide certainty. In virtually all circumstances the application of the tax rules should be certain. It should not normally be necessary for anyone to resort to the courts in order to resolve how the rules operate in relation to his or her tax affairs.
· Provide stability. Changes to the underlying rules should be kept to a minimum and policy shocks should both be avoided. There should be a justifiable economic and/or social basis for any change to the tax rules and this justification should be made public and the underlying policy made clear.
The Committee also says that it “considers that it is important that a person’s tax liability should be easy to calculate and straightforward and cheap to collect. To this end, tax policy should be practicable.” And that “the tax system as a whole must be coherent. New provisions should complement the existing tax system, not conflict with it”.
