Brown gives business a complex

Last week, Gordon Brown reaffirmed the government’s apparent determination to tackle over-burdensome regulation when, at a CBI dinner, he announced his intention to forge a ‘new relationship’ with business.

For more than 100 years, says Brown, the government’s approach to regulation has been based on an inspection regime which he will dismantle in favour of a methodology based on risk analysis.

‘The breakthrough is moving to a risk-based approach – no inspection without justification, no form filling without justification and no information requirements without justification,’ he says.

His words follow the publication of the Hampton review, during this year’s Budget. It was seen as an olive branch to a grumbling business world increasingly under pressure from red tape and regulation. But today, just over a week after Brown’s chest-thumping speech, the Treasury has released its second, post-election, finance bill on a battle-weary business world.

Much of the original finance bill, which was published at a length of 342 pages in March, had to be dropped because there was insufficient time before the general election to debate its more contentious aspects, notably its anti-avoidance measures.

But those measures are likely to be re-enacted today, in a move that John Whiting, tax partner at PricewaterhouseCoopers, hopes will be taken seriously by parliament. Whiting sees the tome-like finance bills of recent years as being a reaction to badly written legislation, resulting in the UK having one of the most complex tax systems in the world.

‘It still remains quite outrageous that 200 pages of legislation went through [before the election] with about four hours of debate,’ he says. ‘This is not the way to do legislation. If we have proper consultation, then that goes a long way. You at least know what it’s all about.’

Brown alludes to the tax regime during his speech to 1,200 business leaders, but some observers say he misses the point. ‘I can assure you that in this parliament we will continue to look with you at the business tax regime so that we provide incentives for investment in wealth creation and rewards for success,’ he says.

While it is important to provide those sort of incentives to business, and driving towards the lowest rate of tax is a goal for everybody – politicians, businesses and individuals alike, say complexity is a more immediate problem.

Many commentators believe the only way to tackle the complexity of our tax system is to return to the drawing board, and re-draft the entire system. While this is not going to happen soon, it does make sense.

Last year, the Commons Treasury select committee reported on its investigation into the compliance costs of our tax system. While no concrete figures were reported because, according to committee chairman Michael Fallon, the ‘revenue departments have failed to establish the administrative costs of tax compliance incurred by business’, some damning information was unearthed.

Business witnesses, Fallon says, believe that compliance costs have increased and that employers are now responsible for: ‘three types of NI contributions; payment of tax credits; collection of student loans; four statutory payments (SSP, SPP, SAP, SMP); the construction industry scheme tax; and monitoring national minimum wage compliance.’

As a result of the committee’s investigation, nine recommendations were made to government to help cut down on complexity, and therefore compliance costs.

The enactment of such a tome-like Finance Act seems against the spirit of such recommendations, and his own pledges to cut down on the regulation and red tape problems business faces. Brown would be wise to revisit the committee’s recommendations.