CIOT: Budget damages certainty and consultation The Chartered Institute of Taxation (CIOT) is concerned that this year’s Budget has damaged certainty and consultation.
Reflecting on the Budget, the CIOT notes that the Chancellor of the Exchequer was educated at Kirkcaldy and Edinburgh, the birthplace and work place of another famous Scottish economist, Adam Smith, who said: “The tax which each individual is bound to pay ought to be certain, and not arbitrary. The time of payment, the manner of payment, the quantity to be paid, ought all to be clear and plain to the contributor, and to every other person.”
Stephen Coleclough, Chairman of the CIOT’s Technical Committee asks: “Has Adam Smith been replaced as the literature of preference at HM Treasury by Franz Kafka and Joseph Heller?”
Examples of this include:
• Whilst one could argue that everyone was warned by HM Paymaster General that retrospective legislation in the employee taxation area was a future possibility, revisiting motives retrospectively is difficult.
• Organising a business to assist a government-encouraged initiative (the Home Computers Initiative) runs the risk of being too successful and being precipitately cancelled.
• The new declaration to be signed by those seeking a special method for VAT recovery also requires one to plead not guilty of an as yet undetermined and arbitrarily defined offence.
The Chartered Institute of Taxation does welcome the establishment of a body to advise on UK competitiveness. And hopes they have regard to Adam Smith’s words.
The Institute has long argued that proper consultation is the only valid way to make effective changes to our tax system.
Stephen Coleclough comments: “Are we seeing the death of the consultation process – or that it is only used when HMRC wish? In the areas of trusts, computers at home and income tax filing dates there has been no consultation on what amounts to a major reversal of Government (and not just Treasury) policy. On the trusts reform, after two and a half years of consultation it would now appear that that consultation has proceeded on an entirely false premise.”
Despite this, the Institute remains committed and available to add the expertise of its membership to the consultation process to “maximise the positive impact on all of our stakeholders … and to minimise … any potential negative impact”, to use Sir David Varney’s own words, of any tax change.
This does not mean that consultation with HMRC doesn’t work. An example of the consultation process working very well is the changes to Stamp Duty Land Tax where discussion took place and technical issues were clarified.
Whilst recognising Parliament’s power to change the law as it sees fit, there are good ways of doing it, and bad. This Budget has certainly shown some of the bad ways.
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Notes to Editors
The quote from Adam Smith is from The Wealth of Nations, Book V, Chapter II Pt II (1776). Adam Smith was appointed Commissioner for Customs in Scotland in 1778.