Tax policy: leave it to the experts

Tax has rarely been out of the news recently. With non-dom issues, changes to
capital gains tax and proposals to attack income shifting in family-owned
businesses, tax has hit the headlines and caught the public’s imagination.

But what we have been faced with is a series of knee-jerk tax rules, whereas
what we need is some cool thinking and a framework for establishing long-term
tax policy.

When Alistair Darling announced that his first pre-Budget report would take
place on 9 October 2007, almost everyone was expecting an autumn election. On
that basis, it was believed that the pre-Budget report would be a bland, holding
exercise. How wrong. Instead we got a series of far-reaching tax rules,
supposedly dealing with ‘fat cat’ earnings on the sale of short-term investment
in business, long-standing and thorny ‘non-dom’ issues and a reaction to a court
decision that went against HM Revenue & Customs.

Not surprisingly, flaws were unearthed in the hurried legislation. In the
end, Darling bowed to pressure and introduced changes, and in the case of income
shifting, a year’s delay. Indeed, this pace of change made it difficult for tax
advisers to advise. How much better it would have been for him ­ and everyone
else ­ if he had consulted earlier on.

In short, this is no way to run a tax system. It is interesting to note that
Ireland recently established a commission on taxation to review the structure,
efficiency and appropriateness of its taxation system.

Their equivalent of our chancellor of the exchequer indicated that its work
would help to establish the framework within which tax policy would be set for
the next decade and it should take a strategic, considered and balanced
perspective that recognised the evolving challenges ahead. The commission
comprises experienced members from all sectors of the Irish economy led by the
recently retired chairman of the tax authority.

I agree with this approach. We need tax policy to address long-term
challenges, based on solid underlying principles. We need consultation in
advance of new legislation and a forum for open scrutiny involving impartial
experts working in the field and key business representatives.

Tax is too important to be left to the politicians. As members of the tax
profession, we not only have an obligation to look after the long-term needs of
our clients, but also to bear in mind the needs of taxpayers generally. So
highlighting some of the broader issues surrounding tax policy are central to
our remit. I look forward to hearing from others who may share my view.

Richard Mannion is national tax director at Smith &
Williamson