Tax policy: leave it to the experts

Tax has rarely been out of the news recently. With non-dom issues, changes to capital gains tax and proposals to attack income shifting in family-owned businesses, tax has hit the headlines and caught the public’s imagination.

But what we have been faced with is a series of knee-jerk tax rules, whereas what we need is some cool thinking and a framework for establishing long-term tax policy.

When Alistair Darling announced that his first pre-Budget report would take place on 9 October 2007, almost everyone was expecting an autumn election. On that basis, it was believed that the pre-Budget report would be a bland, holding exercise. How wrong. Instead we got a series of far-reaching tax rules, supposedly dealing with ‘fat cat’ earnings on the sale of short-term investment in business, long-standing and thorny ‘non-dom’ issues and a reaction to a court decision that went against HM Revenue & Customs.

Not surprisingly, flaws were unearthed in the hurried legislation. In the end, Darling bowed to pressure and introduced changes, and in the case of income shifting, a year’s delay. Indeed, this pace of change made it difficult for tax advisers to advise. How much better it would have been for him ­ and everyone else ­ if he had consulted earlier on.

In short, this is no way to run a tax system. It is interesting to note that Ireland recently established a commission on taxation to review the structure, efficiency and appropriateness of its taxation system.

Their equivalent of our chancellor of the exchequer indicated that its work would help to establish the framework within which tax policy would be set for the next decade and it should take a strategic, considered and balanced perspective that recognised the evolving challenges ahead. The commission comprises experienced members from all sectors of the Irish economy led by the recently retired chairman of the tax authority.

I agree with this approach. We need tax policy to address long-term challenges, based on solid underlying principles. We need consultation in advance of new legislation and a forum for open scrutiny involving impartial experts working in the field and key business representatives.

Tax is too important to be left to the politicians. As members of the tax profession, we not only have an obligation to look after the long-term needs of our clients, but also to bear in mind the needs of taxpayers generally. So highlighting some of the broader issues surrounding tax policy are central to our remit. I look forward to hearing from others who may share my view.

Richard Mannion is national tax director at Smith & Williamson