Chancellor promises fair tax policies for all

Alistair Darling, the new chancellor, has placed consistency and fairness at
the centre of his tax policy and committed himself to ensuring that all
residents pay their fair share of tax.

Darling set out his aims in an interview with Accountancy Age, where
he rejected claims that the UK was a tax haven and unjustly favoured
non-domiciled residents.

‘The IMF does not categorise the UK as a tax haven. This was suggested by
some organisations on the back of some seriously flawed experimental methodology
for identifying tax havens. The government is committed to ensuring a fair and
consistent tax system, and ensuring that everyone pays their fair share of tax,’
the chancellor said.

Darling also said the government had made ‘very important changes’ to reduce
tax avoidance in order to ensure fairness. ‘This is important to the continued
funding of our essential public services,’ he said.

The chancellor’s promises to uphold fairness and protect tax revenues come as
the UK tax system faces a barrage of criticism from unions and tax campaigners
for being unfair.

A recent IMF working paper (which does not represent the official view of the
body) classified the UK as an ‘offshore financial centre’, alongside
jurisdictions such as the Cayman Islands and Bermuda. A DTI website was found to
be promoting the UK as a tax haven.

The campaign against the private equity industry has also criticised UK tax
rules and honed in on the non-domiciled regime as it favours foreign buyout
bosses based in Britain. However, Darling would not commit to reforming the
controversial rules, saying he would not make tax policy on the hoof.

‘This is a complex area and we have an ongoing review considering the whole
issue. Once we see the outcome of that review, we will take stock on what we
need to do next. Whatever we do will be in the best, long-term interests of the
country. Any changes we make to tax will be done in the context of the Budget
and pre-Budget report,’ he said.

Darling said the Treasury would continue to offer research and development
tax credits, even though there were suggestions that the system had been abused
by some businesses.

In 2005, HM Revenue & Customs was forced to crack down on claims for the
reliefs when there were indications that businesses were claiming credits to
which they were not entitled. There were also suggestions that the credits could
be sacrificed to fund headline tax cuts.

But the chancellor maintained that the R&D programme was a key part of
government’s plans.

‘As a former trade and industry secretary, I have seen first-hand the benefit
this can bring to the UK. I am, of course, a strong supporter of measures to
encourage that,’ Darling said.