BusinessCorporate FinanceNo way to behave

No way to behave

The Treasury’s claim that it did not consult on the trusts issue because it would have 'had a behavioural impact' is deeply misleading.

Firstly, the government announced in the Budget red book that it would be
consulting on cracking down on composite companies, the vehicles it feels are
used for tax avoidance purposes.

If it’s happy to consult on that anti-avoidance attack, why not this one? If
those at the Treasury want another example, what about capital losses, a
crackdown introduced in the PBR that was consulted on in the lead up to the
Budget.

If this was what some have called a ‘closing down sale’ type issue, fair
enough – but it isn’t. The major impact of the trusts regime will be
behavioural, in that it will discourage people from setting up the trusts
concerned in the long run.

Announcing it earlier wouldn’t have made a difference. What is surprising
about the events of the last fortnight since the Budget, is that in some ways
the consultation process had been getting better.

Cabinet secretary Gus O’Donnell recently boasted that the government
consulted more on matters than it ever had done before.

So perhaps the let-downs of the Budget are even worse in that context.
Dropping the Home Computing Initiative was in some ways worse than the trusts
move. The government only explained why it had dropped it, when specifically
asked, saying it was being abused. The Treasury never came out publicly and
announced the move, or the reasons for it.

The whole process opens the government up to the charge that it is cowardly
about admitting the decisions it is making, and arrogant for not consulting
experts in what impact those decisions will have.

Alex Hawkes covers tax at Accountancy Age

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