‘Tectonic plates are moving’ and tax system must react, says Tax Minister at CIOT reception

27 Jun 2019

In his short speech at this year's CIOT's parliamentary reception on 25 June 2019, the new Financial Secretary to the Treasury Jesse Norman said he intends to draw on CIOT’s insights ‘heavily’ during his time in the role.

In a speech peppered with historical references Mr Norman explained how the ‘history of parliament is the history of taxation’. Parliament was established in the 13th century, and De Montfort’s parliament of 1275 was a ‘parliament of taxpayers’. In 1625, when Charles I came to the throne, the first thing parliament did was to refuse his traditional grants of duties, thereby disabling the royal income entirely – 20 years later came the civil war. And, in 1776, the English colonies in America split on the issue of taxation without representation. Tax is entirely tied to our history and to our parliament and to democracy, he concluded.

The tax minister (pictured) was just five weeks into his new role when he attended the CIOT reception. He said it was an honour to be invited to speak at the event and playfully said that any advice and ‘genius suggestions’ from CIOT members and other tax professionals will be ‘warmly entertained’ by him and his colleagues.

He set out some ways in which the government would approach the tax system.

Central to this would be accommodating change, such as the growth in the ‘gig economy’. He hopes this will lead to a fresh look at tax and not lead simply the government to bolt on fixes to the current tax system – there has to be systematic change, he said.

Taxes should be kept as low as possible with the minimum of cost and difficulty, and set to help businesses to succeed to create wealth and jobs, he said. We need the tax system to work in a way that seems ‘equitable’; consent has to be maintained throughout the tax system, he added.

The Financial Secretary said the ‘tectonic plates are moving’ and if we want to compete with rising markets in Asia and elsewhere, we need to be a competitive location for overseas investors and domestic companies hoping to succeed in the world.

His second point was that the tax system must play an active role in strengthening society and empowering individuals. An example is that the UK has one of the highest minimum wages in the world; he went on to praise the rises to the personal allowance in recent years.

A progressive system has to place a responsibility on government that people pay their tax properly and on time, said the minister. On the off-payroll rules, he wants to ensure people who work in the same way pay broadly the same taxes. On the loan charge, he said it is not an easy position for the government to find themselves in but the ‘vast majority of people and business that pay their fair share of tax expect others to do the same’.

The tax minister said that the UK has got to be innovative, so we create a ‘stronger, fairer tax system’ that reflects the way the world is going. That means sweeping away some of the cumbersome bureaucratic ways of doing things, he said, but trying to recognise the services they provided and replicate them by more technologically adept ways that are faster, clearer and more responsive to public expectations.

The tax minister stated that his aim for HMRC was to be ‘the world’s leading digital tax authority’. Making tax digital is just the beginning of that. It has rightly been slowed down so we get it right and there are some encouraging signs about how that programme is proceeding, he claimed. ‘We are nibbling away at what is potentially a gigantic iceberg’, he said. The way apps have come forward to meet this need is substantial and the government are looking at greater use of automation to create a potential transformative experience for individuals and businesses alike.

Next year the government will be ‘pioneering’ a digital services tax, he said, and seeking to press for comprehensive long–term approach for reform in the international arena. This is just not ‘off its own back’, he said, rather the government is doing this because it wants to bring these companies to a greater sense of transparency within an international system that allows for a fair payment of tax as appropriate with the minimum of distortion to business incentives.

Finally, the tax minister spoke about Brexit. He said the government will remain committed to ‘responsible economic management’, trying to maintain the crucial balance between investment in public services and infrastructure on the one hand, and enterprise and growth on the other hand. We have to use Brexit to turn a corner in how we think about this country and the future of the UK, he said. Examples include how we balance the needs of an ageing society with aspirations of young people, He also spoke about artificial intelligence and robotics, and of the blurring of corporate responsibility in a world where national borders are becoming blurred physically and virtually.

Attendees included MPs from different parties, CIOT members, and other tax professionals, representatives of financial services organisations and think tanks and journalists.

CIOT president Glyn Fullelove also spoke at the reception. Long after we have come to terms with the consequences of any form of Brexit or indeed no Brexit, we will still be dealing with the enormous changes to the economy of the rise of digital technology, he said. This is reshaping the economy itself, with the rise of the platform giants, the way we work, and, how we can interact with tax authorities and pay our taxes.

Mr Fullelove said the challenge for all our politicians is to understand that such profound change needs a wide and long ranging vision for the whole tax system. Putting sticking plasters on the system in the form of taxes on user generated profits, trying to define who is employed and who is not and focusing on digital compliance as a way of reducing the tax gap may be necessary short term fixes, he said, but longer term a greater vision is necessary.

He also praised LITRG for providing information and giving a voice in the tax system to those on the lowest incomes, and then went to praise the work of ‘Bridge the Gap’ which gives access to free tax advice for people in need.

Conservative MP Craig Mackinlay CTA welcomed guests to the reception in a short speech. 

Caption: Jesse Norman MP speaking at the CIOT event

By Hamant Verma