Treasury Committee publishes report on Budget 2018

12 Feb 2019

The Treasury Committee has published its report on Budget 2018. The committee has emphasised the importance of the design of the Digital Services Tax (DST) taking account of consultation responses.

Key findings

  • Not credible for Chancellor to refer to Brexit ‘deal dividend’
  • Government must provide OBR with required information as Spring Statement 2019 may be first chance for OBR to provide detailed Brexit assessment
  • Government’s fiscal objective has no credibility and should be replaced
  • Inconsistency in Treasury’s spending totals as fiscal headroom set to be spent
  • Chancellor’s ‘imprecise’ statement that austerity is ending is yet to be defined in measurable terms
  • 'Fortunate’ Chancellor faces more difficult choices in future to fund pledge to ‘end austerity’
  • Budget 2018 Equalities Impact Assessment not robust enough

The report includes the ‘traffic light’ assessment of CIOT and some other professional bodies of tax measures in the Budget, against the committee’s guiding principles for good tax policy. On the new off payroll working rules, the report quotes the CIOT as welcoming the government’s decision, in response to concerns raised during consultation, to limit the changes to large and medium-sized engagers and to delay implementation of the changes to April 2020 to give businesses time to prepare and for HMRC to improve the operation of the existing public sector rules. Both ICAEW and CIOT identified issues around determining employment status as adding to the complexity of the off-payroll working rules. CIOT advocated a public consultation on clarifying the dividing line between employment and self-employment. This led the committee to recommend that a good consultation process, with effective participation from stakeholders, including those likely to be directly affected by proposals under consideration, will help new measures meet the committee’s guiding principles.

On the DST, the CIOT is mentioned as welcoming the Chancellor’s commitment to continued UK participation in OECD and G20 work to achieve a long-term global solution to taxing digital multinational companies. The CIOT is quoted describing the DST as a second-best solution that could provoke retaliation from other countries or inspire less narrowly-targeted copycat measures. This led the committee to recommend that, while it is to be hoped that a global agreement on a fair and sustainable way to tax digital businesses will be reached soon, it is important that the design of the DST takes account of responses to the consultation and ensures that there is a level playing field between digital and physical businesses.

The committee has concluded previously that the Treasury should use ONS and HMRC data to produce and publish robust equalities impact assessments of future budgets, including the individual tax and welfare measures contained within them. There has been some improvement in the provision of equalities and gender impact assessments in Budget 2018, but it falls well short of being robust, says the report. At the next Budget, there should be quantitative analysis of the equalities impact of individual tax and welfare measures in all cases where data are available, it says.

Read the full report here.

By Hamant Verma.