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Tax simplification and better regulation

December 11, 2012

Does the use of “better regulation” tools like consultation and impact assessment promote a simpler tax system? (And, yes, I know it all depends what you mean by “simpler”, thanks)

Well, the coalition has four objectives for the tax system – they’re written into the Coalition Programme for Government, no less.  They  say (at item 29, page 30)

The Government believes that the tax system needs to be reformed to make it more competitive, simpler, greener and fairer

So I did a “quick and dirty” analysis of OLD (the “overview of legislation in draft”) published today on the Treasury site – yes, I know it’s on HMRC’s too, but a helpful twitter correspondent pointed out that HMT had it earlier. (Oh, and while I’m here: hint to the Treasury.  When you compile the TIINs into one document, you could add numbers instead of bullet points, so that we didn’t have to manually count them to realise there are tax information and impact notes for eighty-four measures in it.  And a decent editor could have cut out quite a few extraneous blank pages.  And added page numbers that were actual consecutive numbers instead of “A267”.  Ahem.  Yes, well.)

I had a quick look at the “policy objective” field for each of the 84 TIINs and tabulated which ones say they are aimed towards making the tax system

  • more competitive
  • simpler
  • greener
  • fairer

and the results are:

 More Competitive   2
 Simpler  10
 Greener    1
 Fairer  20
 Other  53
and, yes, I’m well aware that this adds up to 86 rather than 84, but there were two measures which plainly said that their policy objectives were to be fairer AND more competitive, and simpler AND fairer.
Like I say, it’s only a “quick and dirty” analysis and if you go through and do it for yourself you might come up with a slightly different answer, depending on how much inference you’re willing to put in.  I resisted inferring policy objectives this time around and stuck to straightforward statements.
Why does this matter?
Well there are some obvious questions – the “greenest government ever” ™ can only manage to come up with ONE tax change aimed at being green?  (It’s page A115 by the way: capital allowances for business cars, and it’s fair to say that it’s one where I actually did have to infer that the “environmental objective of reducing overall CO2 emissions” was a green objective.  It makes a difference of a fair few millions in tax and thousands in administrative burden, but produces an unquantified “indirect impact” of reduced carbon emissions.)
A remarkable number of measures are in the “other” category because the policy makers don’t seem to have answered the basic question of “why are we doing this?” which, yes, I recall from being involved in designing the TIIN process, is actually one of the considerations they’re supposedly taking into account.
Look at page A267, for example. Why are we cancelling the fuel duty increases?  Because “This measure will ease the burden on motorists and businesses”.  OK then.  That isn’t one of the objectives the coalition set itself, but you could, I suppose, say it’s a legitimate policy objective (even if it is startlingly anti-green in context!)
But what about this, from page A171:
This measure will encourage UK bingo promoters to grow their business and expand their customer base by amending bingo duty legislation to modify the restrictions and allow UK bingo promoters to link with overseas operators to offer ‘combined’ games of bingo
Are you seriously telling me that encouraging UK bingo promoters to “grow their business” is a legitimate objective of tax policy?  Or, if it is, is it not part of the overall narrative of making the UK a more “competitive” tax system?
But look at page A75 and tell me where there is an actual policy objective and what it might be:

Policy objective

The measure ensures that the switching of assets in a trust settled by a non-UK domiciled individual to investments in OEICs and AUTs is exempt from IHT charges. It also ensures that no tax will have arisen on those trusts which held OEICs or AUTs when the changes introduced in 2003 came into force.

I’ll have a closer look over the next few days at the ten measures aimed at making the system “simpler” – again, watch this space.

 

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