So it is interesting to see the call ACCA makes that the chancellor should end the complexity and lack of clarity of VAT. This is clearly a worthy aim. But one feels that in suggesting the chancellor should do this by simplifying the system (implicitly on a grand scale) or replacing it with a sales tax, they go too far in what is realistic.
Take the sales tax first. Depending on precisely how it was framed this would very likely be economically and administratively vastly different from VAT, because of its very nature; with different consequences, for businesses and individuals and the economy. A changeover would be uncertain as well as costly.
And because almost certainly as with VAT at present there would be derogations, different rates, and so on the complexities and burdens would not be much less – and may be more.
Which brings us to the idea of large-scale simplification. And this is not such an easy one either. For the most part the complexities are there for sound reasons, social or otherwise-exemption of transport, food, children’s clothes; lower rates on heating; and so on.
One does not easily envisage a chancellor smoothing these sort of things in a big simplification exercise; particularly not the present one who views the whole tax system as an instrument for micro as well as macro policy, and who needs the money. And there is the European dimension.
Of course there are jagged edges over definitional matters, but the same goes with very many areas in which the state interacts with the individual.
ACCA’s argument that it is not acceptable that the businesses should have to meet high compliance costs of one kind or another, and as long as the system is used differently, battles will arise.
None of this is to say that the ACCA isn’t doing us a service in launching its campaign. But it’s necessary not to be too ambitious. One has to start bottom up.
The campaign should focus on the more apparently absurd complexities, picking them off one by one, and working with Customs & Excise over what the ACCA calls its ‘blocking tactics’, to get rid of these where they’re not justified. That, rather than root and branch, is surely the better approach.
- Sir Peter Kemp is a member of the ICAEW and a former civil servant.
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