PracticeConsultingTax consultation needs surgery.

Tax consultation needs surgery.

When the furore exploded around double tax relief in last year’s budget, many said it was a sign that government consultation wasn’t working.

A report from the Chartered Institute of Taxation (CIoT) has now attempted to lift the lid on consultation and where it appears to be going wrong.

As one expert put it, if this were a school report it would say: ‘There’s been improvement, but the government could do better.’

And one area where it could improve lies in the observation that poor and unpopular tax legislation is likely to result when the government fails to follow its own consultation rules. DTR, they say, is a key example of where it all went wrong.

The clear lesson from that episode, which saw chancellor Gordon Brown and the Inland Revenue embarrassed when they miscalculated the cost of changes to DTR, is that ‘more haste, less speed,’ is required.

The CIoT’s document, The Good, The Bad and The Complex, A Survey of Tax Consultations, has now been sent to officials at the Revenue, Customs and the Treasury from where there has been no official response.

But the CIoT is unrepentant. John Whiting, a PricewaterhouseCoopers tax partner and president of the institute, said the government needed testing because Labour came to power with the claim that it would be the ‘government that consults’.

The CIoT’s most important finding is that legislation goes wrong when consultation procedures are not followed. It views consultation as happening in three stages. First, seeking agreement in principle; second, agreeing how to implement; and third, consultation on draft legislation.

‘The most important conclusion we’ve drawn from the survey is that the consultation process is most likely to fall into difficulty when one or more of the three stages has been omitted,’ said the report.

It adds that DTR and work on taper relief for capital gains tax are prime examples of these errors.

The other major areas the CIoT considers is that there is proper reporting back by government bodies when the consultation is over. The institute wants evidence that the contributions from itself and other organisations are being read and considered.

If advice is being rejected, they want to see there are good reasons for doing so.

‘From our point of view,’ says John Whiting, ‘there are times when you think: “Is it really worth it?” That’s why one of my hobby horses is seeing that there is proper reporting back.’

The CIoT’s website is at www.tax.org

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