The Debate: Losing the Budget straightjacket

Losing the straightjacket

by John Whiting
Tax legislation has undoubtedly been a growth industry in the UK in recent years. The consultative process has helped tax advisers to cope, giving a chance to familiarise and iron out some of the potential glitches.

A year to talk about and work on proposals is ideal but even announcements with just two or three months notice are still helpful.

Accordingly, Budget day cannot be the full monty: the only occasion in the calendar for tax announcements. The chancellor really must have revealed a certain amount already.

Is that a problem? Quite the reverse, in my view. We need active dialogue with the tax authorities throughout the year, rather than having Budget day as the straight jacket of the only time to announce tax changes.

We have enough tax changes to keep hungry advisers going throughout the year – we do not have to gorge ourselves over 24 hours, get fiscal indigestion and then fiscal frustration over trying to change rules which the authorities see as perfect against ludicrous time pressures.

You’ll deduce that I applaud the chancellor’s 26 March announcement of the various corporate tax measures – something the CIOT called for to remove uncertainties.

Business needed to know whether these promised changes would indeed come in on 1 April rather than having to operate under uncertainty.

After all, certainty in tax is a key component of ensuring fairness.

We can’t, however, get away entirely from the Budget day show.

The chancellor – and tax – deserves time in the media spotlight. The Budget also acts as the annual report of UK plc. Like any plc, we need proper time and attention on the results and prospects.

The headline tax changes – raising or lowering income tax, VAT, national insurance etc – need to be announced clearly and as a proper package.

But the more we can get the detailed tax changes away from being concentrated on Budget day and instead spread throughout the year, the better.

After all, if the chancellor, despite moving many tax announcements away from Budget day, still manages to talk for an hour, just imagine how long the Budget speech would have to be if all tax changes were announced in one go.

Gladstone’s record-breaking speech of 4.57 hours would undoubtedly be under threat.

Is that what we really want?

  • John Whiting is president of the Chartered Institute of Taxation and a partner with PricewaterhouseCoopers

Don’t mess with tradition
by Peter Williams
At a recent gathering of small business leaders chancellor Gordon Brown confirmed what he had previously announced by saying the 2002 Budget would contain provisions which would … would what? Hell I forget now, but when I saw the announcement I knew it was yet another blow to the traditional Budget process.

Clearly I am becoming old and grumpy because I prefer the traditional system when after weeks of hype and rumour, the chancellor emerged from his pre-Budget purdah to deliver the Budget.

Admittedly it invariably failed to live up to the billing journalists and tax experts had given it, but at least we didn’t know most of the tax rates for the next financial year like we do now.

I blame the introduction of the November pre-Budget report. The idea was to link the announcement of how the taxes were going be raised with how it was going to be spent. All that has happened is that the November statement gives the chancellor yet another excuse to act like the most traditional of teachers and tell us what he’s going to tell us, tell us and then tell us he’s told us. So now the chancellor will announce a change that won’t come into effect for a tax year.

Because tax changes are being announced throughout the whole year, the most long-winded politician would have trouble making the Budget sound busy and new. To get round that problem the chancellor has started to add in important non-tax announcements under the ‘pretext of cutting red tape’ or ‘encouraging enterprise’. Waiting for an announcement on the rise in the audit threshold?

Well, don’t be surprised if Gordon catches us all off guard by slipping in a little throwaway line about the subject. The problem with this trend is that even the most assiduous tax guru is confused about what’s in place, what’s about to be put in place and what might be put in place. This all may sound petty but it’s not.

The old-style Budget not only generated a sense of occasion and excitement which put tax in the limelight for a while but ensured that politicians and public were focussed on how we were taxed.

And in a democracy that matters. This new style of Budget means we are less focused and less interested – and that means there is a likelihood of less scrutiny and less genuine accountability.

  • Peter Williams is a freelance writer.

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