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?