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Tax simplification and better regulation.

January 18, 2017

My PhD-in-progress asks the question whether using better regulation techniques produces tax simplification, a question to which the glib answer is, of course, “it would, if they did”. So in keeping with the Making Tax Policy Better report and the suggestion that this is just the start of a conversation, I have been wondering what progress we might make towards a simpler tax system by making better use of the tools we already have.

Look, for example, at the 51 TIINs published on 5 December to support the draft 2017 Finance Bill.  If you take these and put them into a spreadsheet, listing the three quantifiable fields (exchequer impact, administrative burden and HMRC costs) what do you find?

The measures fall into three crude categories.  Firstly, there are those measures whose overall impact will be greater than £100 million.  Insurance Premium Tax: increase of standard rate, for example, or Abolition of Class 2 National Insurance contributions.  The Chancellor must be allowed to determine how and where he raises the money he needs to fund the expenditure he incurs: decisions about these large measures is political, and we can leave them alone for these purposes.

Secondly there are the measures which have smaller impacts. Personal Tax: changes to bands for ultra-low emission vehicles in company car tax for example will raise some tax, save some admin burden and cost HMRC some money.  Personally if I were an MP debating the Finance Bill I would want these relatively trivial measures to balance out: I would only allow as many measures which increase tax by amounts less than £100m as there were measures which decreased tax or administrative burden by similar amounts.  I suspect if this balance were demanded, the number of such measures might significantly decrease.

Finally there is the category to which I would wish to draw your attention today.  There are fully twenty measures where, so far as I can see, the exchequer effect (the actual tax raised or foregone) is zero, and both the administrative burden on taxpayers and the cost increases or savings for HMRC are either nil or negligible.

The question then is – why the hell are we doing them?  Here is a random selection:

Tobacco Duty: Illicit Trade Protocol – licensing of tobacco manufacturing machinery is a provision to licence tobacco manufacturing machinery.

Co-ownership authorised contractual schemes: reducing tax complexity seems to be a tidying-up of capital allowance rules for operators of co-ownership authorised contractual schemes (CoACS) and their investors, and yet will have a “negligible” impact on the tax they pay or on their administrative costs.

Landfill Tax: definition of taxable disposal will affect approximately 150 specialist disposal firms in England (the tax is or will be devolved in Scotland and Wales) and they will “incur negligible on-going savings through the removal of the requirement to inform HMRC about certain non-taxable activities.”  (HMRC couldn’t have just written them a letter??)

The Treasury and HMRC have an easier ride than other Departments in getting legislation before Parliament: they do not have to bid for space in the legislative programme, and Finance Bills are counted as “money bills” and subject to an easier passage through Parliament as the Lords can only delay rather than amend them.  There is a broad definition of “money bills”  which includes one “which in the opinion of the Speaker of the House of Commons contains only provisions dealing with … the imposition, repeal, alteration, or regulation of taxation…”  Perhaps someone should have a word with John Bercow?  It seems to me that, were he to declare that in his opinion no measure which produces neither tax, administrative burden saving nor government cost saving was a provision regulating taxation… and therefore no Finance Bill containing such measures could be certified as a money bill…

…well, perhaps he might, at a stroke, become tax personality of the year for his services to simplification of the tax system?

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Better

January 17, 2017

Yesterday I was in London for the launch of the joint Chartered Institute of Taxation, Institute for Fiscal Studies, and Institute for Government report on improving tax policymaking.

The report, Better Budgets: Making tax policy better, is here. There are ten suggested steps towards making tax policy better, the first of which – moving from two to one fiscal event each year – has already been adopted.

There was an interesting discussion at the launch including a response from the FST and contributions from Andrew Tyrie from the Treasury Select Committee and Edward Troup from HMRC.  There is even video – fortunately I was sitting out of sight of the cameras so it’s safe to watch!

The report is described as being the start of a conversation and I have some thoughts about that which I’ll put together later this week if I can.  However the interesting part of the discussion yesterday was, for me, the comments Edward Troup made about widening the conversation.  Because there was a feeling of familiarity about the collection of people in the room yesterday: I found I recognised a fair number of people and there was talk about “partnership” – between politicians and tax professionals – in making the Budget in future.  And, yes, I was tweeting that this horrified me, because tax policy is too important to be left to the wizards.  We need to bring the tax muggles on board too.  I was charmed – and immensely pleased and relieved – to find Edward Troup arguing for the inclusion of the muggles too.  Kudos!

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Equality again

January 16, 2017

Well this is interesting. Cat Smith, Shadow Minister for Women and Equalities,  asked in a written parliamentary question on 13th January

when the Government plans to publish the equality impact analysis of the Autumn Statement 2016 to comply with the Public Sector Equality Duty.

David Gauke’s reply said amongst other things that

 There is no statutory requirement to prepare this information in a particular form or to publish Equality Impact Assessments.

Now, there is no requirement to assess and publish the impact of the Budget or the Autumn Statement as a whole, a giant loophole in equality legislation that was opened up or at least exposed by the Fawcett case (when the Fawcett society brought a judicial review of the 2010 “emergency” Budget).  Nor is there a requirement to prepare a separate document called an Equality Impact Assessment.

However the outcome of the Fawcett case was – I always understood – an undertaking from the Treasury that they and HMRC would assess the impact of individual measures in a better, more systematic way.  And – I always understood – this was reflected in the design of the TIIN, which includes a specific field for the result of the work done on assessing the impact on equalities.  If you refer back to May 2012 where I published the TIIN instructions you will see they included this passage:

Equalities Impacts

This test concerns people with protected characteristics. All policies must be signed off as compliant with this statutory test. At each stage of policy development you must comment on what work you have done to see whether you have given due regard to any impact on people with these characteristics and say so explicitly if you think it has none. You must keep an audit trail of your consideration, and retain this written record in the policy area so that the Department can show it is fully compliant with the law, now and in the future.

The policy is likely to impact on Equality and therefore required to complete a separate equality assessment if you answer yes to any of the following five questions:

Will the policy or its implementation have a particular impact onindividuals with one or more of the equality groups below?

Are particular communities or groups likely to have different needs,experiences and/or attitudes in relation to the policy or itsimplementation?

Are there any aspects of the policy or the way that it is implemented that could contribute to inequality?

Could this policy or its implementation have a positive impact on equality groups?

Could the aims of the policy be in conflict with equal opportunity,elimination of discrimination, promotion of good relations?

There are 10 protected characteristics that you need to consider:

Racial Group, Gender, Transsexual/ Transgender, Disability, Carers, Age, Sexual Orientation, Religion or Belief, Marital Status/ Civil Partnership, Political Opinion (NI only).

It is important that you look at the Departmental guidance and liaise with [Personal data redacted under Section 40 of the FOI Act 2000] in ICD when considering Equalities impacts as they now ‘own’ this part of the process.

And this is what it says in the current TIIN instructions, which I published last week:

Equalities impacts

This box needs to show we have had “due regard” for equality to comply with section 149 Equality Act 2010 (and similar Northern Ireland legislation). So it is not enough to say that the measure does not discriminate. A mistake that is often made is to say that there is no equality impact when there is: just about any change to personal tax for example will have an equality impact, because it will tend to affect some groups differently to others. A lot of business tax changes do too.

If the measure affects people this box should be used to say what we know about who those people are (men/women, young/old etc). The Customer Equality team in Central Customer Directorate (CCD) can advise.

Has there been a substantive change?  The Minister asserts there is no statutory requirement to publish the equality impact in ‘any particular form’.  Well, no: there isn’t a statutory requirement.  But there is a reasonable expectation, surely? Equalities impact was and remains a fundamental part of the TIIN process, and a TIIN is published with all tax changes.  Amusing as it may be for politicians to play the great game of answering parliamentary questions with as little information as possible, might it not have been more helpful to have said that?

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TIIN instructions

January 13, 2017

I have now received a response from HMRC to my Freedom of Information Act (FoI) request for the current TIIN instructions: there are some embedded in the TIIN template here:

170104_tiin_template

and some further guidance here:

170104_wendy-bradley_tiin-guidance

I am obliged to the HMRC FoI team for sorting this out, although of course it is evident from looking at the files that there are further instructions in the TIA (Tax Impact Assessment) guidance which has not  been included.  Nor is there any explanation of why this information isn’t part of the routine publication schedule – there really isn’t anything secret about it, and it’s useful data for those of us who take an academic interest in the way tax legislation is developed and produced, as well as for legal, accountancy and trade organisations who routinely give comments on tax proposals.  How about it, HMRC?

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Open consultations

January 12, 2017

Oh look, there are still seven open consultations on gov.uk relating to the policy area “tax and revenue”.  Of course, it’s a slightly different list of seven from the last time I looked…

(Employment Allowance: restricting the allowance from employers of ‘illegal workers’ closed on 3 January

Withdrawal of extra statutory concessions – technical note and call for evidence opened on 10th January and runs till 7th March)

However as yet there is no sign of the promised responses to the seven consultations on the “making tax digital” proposals. And weren’t we supposed to be able to try out the free software in “autumn 2016′?  Er, hello?

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Inner Peace?

January 11, 2017

I don’t want to do my tax return.

I don’t want to do my tax return, because it’s boring, and difficult.

I don’t want to do my tax return, because it’s boring, and difficult, and it’s important you don’t get it wrong.

I don’t want to do my tax return, because it’s boring, and difficult, and important you don’t get it wrong, and it won’t make a blind bit of difference because I don’t owe them any money (or vice versa) anyway.

I don’t want to do my tax return because it’s boring and difficult and important you don’t get it wrong, and it won’t make any difference, and they know it all anyway.

I get a pension covered by PAYE, and I make less than the MTD threshold doing odds and ends of writing, and I get less than the dividend allowance on my non-ISA shares (actually, have I even got any non-ISA shares?) and less than the Personal Savings Allowance on my bank interest (actually, did the bank even pay me any interest?) and, honest go god, if they’d just take it and go away I’d happily pay the £100 fine not to have to fill in a tax return by the end of the month.

(I understand why they don’t do that, of course, because it would be a great tax loophole for people who really need to be doing a tax return)

But, honestly, every single thing that will be on my tax return is information already known to HMRC aside from my derisory three line accounts.  Which is why I’m so interested in MTD.  If it was a case of, “here’s your tax return, all you have to do is check over the figures, add your three line accounts and press send”, then it would be a boon for people like me.

Is that how we think it will work?  Or am I, instead of once a year, going to find myself in a couple of years time sitting four or five times a year thinking “I don’t want to do my taxes…”

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Straws in the wind

January 9, 2017

You may remember that in 2012 I published the rules for production of a tax impact assessment here, after I obtained them via a Freedom of Information Act (FoI) request.  I remain surprised that they are not on the gov.uk publication schedule like the instructions for Regulatory Impact Assessments since they are the equivalent.  Well, 2012 is a while ago, so on 7th November I made a FoI request for an updated copy and received an automated response with a reference number.

A month went by, so I sent a little reminder that the twenty working days deadline had been breached, and received an email back which said

Unfortunately I am currently unable to confirm your request for information being received by the Freedom of Information Team.  I have noted the reference number you have provided would have been generated by one of the department’s online enquiry forms but am unable to trace your request…

The email went on to ask me for a phone number and I had a conversation with them where they said that my request – and, judging from the reference number, a number of others – had been lost in the system.  I emailed it again directly, and I’m still waiting for a response.

Except… well, last week I received this:

Please do not reply to this email.

Thank you for contacting HMRC. You have submitted an on line enquiry using an incorrect system to a mailbox which is no longer monitored. Due to this, I am unable to reply due to Data Security issues. Could you please direct your enquiry to the correct department by following the attached hyper-link or by reviewing your Personal Tax Account, details for which are below:

Is this a phishing email?  (Because who follows hyperlinks from emails, seriously?) Or is it a response to my original FoI request (which was made on the page I got from putting “FoI” and “HMRC” into Google – I find “incorrect system” a bit annoying tbh).  Am I ever actually going to get a response to my FoI request – which I made twice, once to the automated system and once in a clear email to the person who had phoned me, and I imagine the information commissioner will find at least one of those to be a valid request.  Look HMRC, what the hell is going on?

OK, but obviously the FoI form is a separate part of the HMRC computer system: a failure there won’t have any impact on the system they build for MTD, right?  I mean, right???

 

 

 

Edit: this morning I received this response from the HMRC phishing email address:

Thank you for contacting HM Revenue & Customs.

The e-mail / phone call you received was from HM Revenue & Customs and is nothing to be concerned about.

If you think this communication is incorrect, you may wish to contact the relevant HMRC business area. HMRC contact details are published within the link below:

https://www.gov.uk/government/organisations/hm-revenue-customs/contact

If your query relates to HMRC online services, you can contact our Online Services Helpdesk by telephone – 0300 200 3600 (opening times 08.00-20.00 Monday to Friday, 08.00-16.00 Saturday), or by following the link below

HYPERLINK “mailto:helpdesk@ir-efile.gov.uk” helpdesk@ir-efile.gov.uk
Regards

HMRC Online Security Team

I’m really none the wiser.