|Adam Broke speaks out – Extracts from his lecture
‘From the perspective of the citizen the complexity of the UK tax system is certainly burdensome. All compliance costs fall ultimately on the consumer and are a burden on an economy. At matters now stand we have no institutional means of promoting reform. The administrators do not have the time and Ministers do not have the will; there is no incentive for anyone to take on reform in the way that this Government is addressing social security and education. But there is a great need for positive change.
So what can be done to improve the situation? I think it is very unlikely that we can make any real progress on reform without some measure of institutional change. I suggest some kind of body to control and develop the process of tax reform, while leaving policy to the politicians. What is needed is a body with authority and independence to clean-up fiscal legislation. It would be a tax reform committee making recommendations for reform and simplification on the basis of fiscal neutrality, which could be enacted by Parliament.
Such a body would have to be given greater powers than the Law Commission to get Ministers to implement its reports. But it would have to operate so far as possible on the basis of fiscal neutrality. It would require a modest amount of funding and be told to report regularly on subjects of its choice. It would of course need to consult with the Revenue Authorities. It would then be up to Parliament to ensure that its findings were implemented. It would be a useful step towards tackling the problem of complexity in the tax system.’
Adam Broke is a partner at Adam Broke & Co, London. He is a previous Chairman of the Technical Committee of the Tax Faculty of the ICAEW and a past President of the Chartered Institute of Taxation. The Hardman Lecture is an agenda-setting annual event in the tax calendar. It is named in honour of the late Philip Hardman, the well-known and respected tax expert.
THE ENGLISH ICA TAX FACULTY’S CAMPAIGN
The faculty has set out its views in a discussion paper called ‘Towards a better tax system’.
It sets out ten tenets for a better tax system:
Statutory – tax legislation should be enacted by statute and subject to proper democratic scrutiny by Parliament.
Certain – 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.
Simple – the tax rules should aim to be simple, understandable and clear in their objectives.
Easy to collect and calculate – a person’s tax liability should be easy to calculate and straightforward and cheap to collect.
Properly targeted – when anti-avoidance legislation is passed, due regard should be had to maintaining the simplicity and certainty of the tax system by targeting it to close specific loopholes. Constant – changes to the underlying rules should be kept to a miminum. 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 clear.
Subject to proper consultation – other than in exceptional circumstances, the government should allow adequate time for both the drafting of tax legislation and full consultation on it.
Regularly reviewed – the tax rules should be subject to a regular public review to determine their continuing relevance and whether their original justification has been realised. If a tax rule is no long relevant, then it should be repealed.
Fair and reasonable – the revenue authorities have a duty to exercise their powers reasonably. There should be a right of appeal to an independent tribunal against their decisions.
Competitive – tax rules and rates should be framed so as to encourage investment, capital and trade and with the UK.
The discussion paper concludes: ‘The question remains as to how the ten tenets could be introduced into the existing system. We are under no illusions that this will be a swift process; though it could be if the political will exists.’
‘But the first indispensible step is to air the issues and demonstrate their immense relevance to every business and household in the country. Only serious and prolonged debate is likely to make Whitehall set time aside from its main pressures and consider reform of the tax system.’
To contact the tax faculty to get a full copy of the paper, email firstname.lastname@example.org
or phone 020 7920 8646.
The English ICA’s website is at www.icaew.co.uk