Looking at the Finance Bill

On cue, a few days later the 2002 Finance Bill was published. We already knew it would contain at least 250 pages but the real question was whether the chancellor would double it. He fell short, with only 488 pages, but no doubt by the time the Bill is an Act it will top 500 pages. But this is not all. Once, unless you were advising on VAT, most legislative material was in primary legislation. These days, a vast amount of tax-related legislation is contained in statutory instruments. The Finance Bill is no longer the flagship, but has been relegated to the tip of an iceberg; the real menace is below the waterline.

The 2002 Finance Bill includes a number of reform packages, notably the overhaul of intellectual property and new exemption for substantial shareholdings.

Brown and the Revenue should be applauded for these developments. But when you look at the rest, you despair. Every year I look through the Finance Bill I have a sinking feeling. One cannot help but ask ‘did we need all this?’

We live in a complicated world, but it is debatable whether our tax rules need to be so complicated. Do we need pages of regulations to provide a tax exemption for six cyclists’ breakfasts a year, but only on designated cycling days? Despairing employers might ask employees ‘Is your journey (by bike)necessary?’ We appear to be locked into a cycle of change and complexity.

The real killer is the lack of consistency. For example, tax credits were introduced in October 1999 but, just when the system was starting to bed down, it is all change. Will these changes be for the better or just different? Who will explain them all? Employers. Changes to the NIC rules made in the Budget will make the system complicated to understand and administer. Who will deal with the fallout? Employers.

Returning to the cuckoo, I am reminded of the story of the early days of the DVLC and one frustrated driver. His final letter was addressed to the Chief Cuckoo, Cloud Cuckoo Land, Cardiff. The Post Office had no problem delivering the letter. Without consistency and a real attempt to keep complexity to a minimum, the tax law could descend into chaos.

And the consequences will be serious.

  • Frank Haskew is senior consultant to the ICAEW’s tax faculty.

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