Posts Tagged ‘economy’

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RTI, UC, and 42

March 11, 2013

If you’re earning, you don’t pay tax on the first £8105 of your wages – around £155 a week.

The aspiration is that this will go up to £10,000 – around  £192 a week.

If you’re employed on the minimum wage (which is £6.19 an hour – allowing for a 37 hour week) you’ll earn 228.29 a week and pay tax on £73 of it.

If you’re unemployed, you’ll get JSA of “up to” £71 a week

And if you’re on the state pension, you’ll get “up to” £107.45 a week.

OK then – let’s look at what happens if you are unemployed and you are offered a few days work – something seasonal, say, like fruit picking, or something short term and semi professional, like a data entry or translation job that only has a few days work attached, or perhaps you’re a semi-retired barmaid or a waitress and you occasionally cover for absence at the local pub or restaurant.

Let’s think about it from the employer’s viewpoint for a moment.  Either they use an agency and let the agent handle all the recruitment and payroll business – all you need is a specific number of bodies who can carry out a specific task after all – or else you do it yourself.  You pick someone you’ve used before, perhaps, or someone you know, and you pay them along with your other payroll and you process the payment at the end of the month along with everything else.

This year, along comes Real Time Information, RTI, where you are going to have to tell HMRC about the payment at the time you make it, even though you know your unscrupulous rivals are going to be tempted to bung their Friday night replacement barmaid a few quid in cash in a brown envelope and say no more about it.

Now there’s been a certain amount of kicking off about this in the accountancy and payroll press but then there always is when there’s a major change.  Either it’ll work or it won’t, and if it doesn’t then there are existing systems that people can fall back on.

But look at it from the point of view of the employee.

What happens at the moment if you’re unemployed and you’re offered a few days work?

Well, you “sign off” and – apart from the few quid you get for your fruit picking – you get nothing until you’ve managed to “sign on” again.  And it could be six weeks before your benefits come back on stream.  So you don’t take the work, because you can’t afford it.  A few days work might leave you penniless – literally penniless – for over a month.  You don’t have savings.  You don’t have mummy and daddy and a trust fund to fall back on.  You might wind up homeless, or having to get food from a food bank and a loan from a loan shark.  Or you work “cash in hand” and don’t mention it to anyone, and spend months or years worrying that you’re going to be penalised as a “benefit thief” and wind up on the front page of the Daily Mail.

There has to be a better way.

Universal Credit was supposed to be it.  Doesn’t look likely, not if you believe what you read in the papers, anyway.

So let’s do a thought experiment.  What would we WANT to happen, in an ideal world?

Personally, I’d like to see the tax threshold, pensions and benefits aligned.  So if you were working we’d move away from you not paying tax on the first £10,000 to giving you £10,000 but taxing you on everything else.  And if you were a pensioner, you’d also get £10,000 a year automatically.

And if you were out of work?

Well, you’d still get your £10,000 a year.  Only it would be on a daily, not weekly, basis.  £10,000 a year is £27.40 a day.

OK then.  You’re unemployed.  You sign on, and you’re paid £27.40 a day.  (Why not?  It’s going to be paid direct into your bank account anyway, and £27.40 a day is no harder to transfer than a £822 a month)

You pick up a day’s bar work.  You fill in the box on the claim screen that says you’ve had a day’s work.  The screen shows a smiley face and the words “congratulations!”  And you still get £27.40, because, well, everyone does, and as well as that you also have your money from the day’s bar work, less the tax which was taken off under RTI before you were paid.    But actually you wouldn’t NEED a claim screen, or to tell anyone you’d earned any money, because for tax and benefit purposes you’d be in exactly the same position as someone earning the minimum wage OR someone on an MP’s salary – you’d have your Citizen’s Income as a fall back, and you’d also have whatever earnings you could find, net of tax which was paid before it came to you.

So work pays – the money you get for working is yours to keep on top of  the £10,000 a year that everyone gets anyway.

Yes, I’m talking about a citizen’s income.  More specifically, replacing the tax free personal allowance with a Citizen’s Income.  Abolish means testing, tax credits, benefit caps, universal credit, JSA, pensions, tax free allowances and just give everyone ten grand a year.  And tax them on everything they earn above that.

 £10,000 is about £42 a working day  (take 10 bank holidays, 52 weekends and two weeks holiday off of 365 days and you get 241 days.  Let’s cheat, call it 240, and then round it up.  It IS Douglas Adams’ 61st birthday, after all)  There are currently two and a half million people out of work (1.5 million on the claimant count) supported by 29.73 million in work.  There are about 400,000 unfilled jobs.
Personally I’m very relaxed if the two million people for whom there ARE no jobs spend their time watching Bargain Hunt on forty two quid a day.
This post is the sixth of my ten Red Nose Day sponsored posts.  Thanks again to all who have donated!
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One point one billion

January 9, 2013

The coalition government doesn’t like the additional income tax rate of 50% on people with incomes of more than £150,000 a year. It says that the previous government’s estimates of the yield were wrong and published a detailed paper reviewing the actual amounts raised, to support its argument that the rate should be reduced from April.

The detailed report is here and if you will be kind enough to turn to page 39 and look at table 5.3 you will see that the adjusted figure for yield in 2010/11 is £1.1 billion.

In other words, if I’m reading it right, the government says that the additional rate didn’t bring in the five or so billion that Labour had suggested, but it did bring in £1.1 billion.  The conclusion (paragraph 5.64 on page 45) agrees:

Although the estimates are subject to a wide range of uncertainty, they suggest that the underlying yield is much lower than originally forecast, possibly only raising £1 billion at most.

Now, there was some comment yesterday during the debate on the Welfare Uprating Bill, because the Impact Assessment hadn’t been published till a couple of hours before the debate, so the information in it couldn’t really be used to inform the discussion.

Let’s look at it now, shall we?  Here it is: and, oh look!  Here’s what it says about the yield (the amount of money the government will “save” by not uprating benefits to keep pace with inflation)

Overall, it is estimated that savings to the Government from up-rating certain benefits by 1 per cent rather than by the CPI inflation rate, will be around £1.1 bn in 2014/15 and £1.9bn in 2015/16 in cash terms.  The savings will continue into the future and gradually increase in cash terms.

Of course it’s not a straightforward comparison – if it were, would even this coalition think that spending £1.1 bn on tax breaks for those earning over £150k was so important they’d take £1.1bn off of people working in low paid jobs and earning tax credits to pay for it… would they?  The £1.1bn from the top rate tax is the adjusted estimated total yield from the tax and not the total estimated reduction in tax take due from reducing the rate.  But if you look here at the tax information and impact note for the rate change you’ll see that the government aren’t really sure what the effect of reducing the rate will be, which is of course entirely in tune with their argument that we aren’t really sure what the tax brings in in the first place.

The impact assessment, of course, is a tool of evidence-based policy-making, and on these documents the evidence looks a bit uncertain to me.  Is the argument made?  Time will tell.

But in cash terms, what we seem to be talking about is whether incentivising the 300,000 people who pay additional rate income tax by giving them a tax cut of five p in the pound for their income over 150k is more important – more useful to  society?  More likely to get the economy moving?  More just?  More fair?  More… civilised?  Than taking it from people on job seekers allowance because there are no jobs, or on working tax credit because the jobs that exist are low paid?  It seems to be a question of priorities rather than evidence.

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For some values of “interesting”. Part the third.

October 9, 2012

Here’s what I actually sent in response to the Financial Policy Committe: Macro Prudential Tools consultation

1 Do you agree that the FPC should be responsible for setting the level of the CCB in the UK?
What are you asking here? Do you want to know whether we think there should be a Financial Policy Committee or a “Counter Cyclical Buffer” at all? Because if the existence of the authority and the mechanism are taken as read, then it’s obvious that the one ought to be in charge of the other. However as evidenced in the IA, you don’t seem to have considered (or at least to have shared in this document) any other option except creating the FPC or not. In short, the answer has to be “yes” because of the way you’ve framed the question, but the case for change is not made because you haven’t given any evidence of having considered any alternatives.

2 Do you have any views on the Government’s proposal to give the FPC control over the CCB buffer rate for the UK before 2016?
As for 1: it seems we’re taking part in a macro-prudential experiment whether we will or no.

3 Do you agree that sectoral capital requirements will be an effective macro-prudential tool for the FPC?
Were you a Latin scholar? I seem to remember that there is a Latin formulation for “a question expecting the answer, yes”. It sounds like a reasonable idea, but I would like to see a reasoned consideration of some alternative proposals before agreeing. It may be “effective”: will it be the most effective alternative we could reasonably adopt? I can’t tell from this.

4 Do you agree that the FPC should have the ability to apply granular requirements e.g. differentiated by LTV or LTI for residential property related assets?

As for 3. I would, however, like to point out that it appears that you are proposing a “fine tuning” mechanism which might well impose prohibitive costs or entirely prevent access to some forms of financing for particular kinds of customer with no consideration being given at the time of adjustment to any question of equality – for example it looks as if you could cut off the housing market entirely to dampen market “exuberance” without needing to consider the consequences for the people denied housing. I strongly suggest the FPC needs to be covered by the Equalities Act and to have a statutory requirement to give “due consideration” to equality issues as they might affect the end user of the banks’ or other financial institutions’ services before taking any action.

5 Do you have views on how macro-prudential sectoral capital requirements should be integrated with the existing micro-prudential framework?
None at all, sorry.

6 Do you agree that the FPC should have a direction-making power for a time-varying leverage ratio once international standards are in place?
Well again, it would be a pretty pointless institution if it didn’t, but what alternatives have you considered? Is there a need (for example) for the UK’s institutions to have a different mechanism from the EU’s or do you envisage the FPC acting as the UK arm of the ESRB? I also dislike the idea of giving the FPC carte blanche at this stage but would like to look at this again in 2018 or whenever the envisaged “international standards” are being put in place.

7 Do you believe that there is a case for the scope of the FPC’s directive tools to be applied to firms that are currently outside the purview of CRR/CRD IV?
No opinion, except again to point out the dearth of options offered.

8 Do you have any views on the best definition for exempting small investment firms from the FPC’s directive tools?
First use the SFIT definition (fewer than 20 employees) and then, because that doesn’t necessarily map to risk for a finance company, have a turnover and/or capital test. Around a million, probably.

9 Do you have any views on whether procedural requirements under FSMA 2000 should be modified or waived when the regulators implement FPC directions?
Either there’s a reason to have “procedural requirements” or there isn’t. If there’s a reason to have them, in that you’re trying to used evidence-based policy to make the best decisions, then that might be overriden in an immediate need, where someone (the FPC) has to make the decision urgently on evidence that might not necessarily be immediately available or shareable. But the procedural rules should still apply post hoc to justify the *retention* of the direction, or the direction should fall. In particular there should be no margin for equality issues to be overlooked or overruled.

10 Do you believe that liquidity requirements could be a useful tool for the FPC to have a direction power over once international standards have been developed?
As for 3

11 Do you believe that margining requirements could be a useful tool for the FPC to have a direction power over once international standards have been developed?
As for 3

12 What is your assessment of the advantages and disadvantages of granting the FPC a power to set and vary maximum LTV and/or LTI ratios?
No opinion, except to reiterate that there must be other options than do it/don’t do it. What are they?

13 Do you agree with the Government that recommendation powers will be sufficient to implement disclosure policies?
As for 3.

14 Do you have any comments regarding the Statutory Instrument?
Yes: I am surprised that you are asking for comments on the SI and not on the accompanying IA which is of poor quality (I see it has an amber rating). I have commented further on this in my blog entry.

Regards

Wendy Bradley
http://tiintax.com

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Citizens are stakeholders. Discuss.

September 7, 2012

I have blogged before that I think there’s something fundamentally awry in the tax consultation process.  While it’s entirely laudable that the government wants to make tax changes in a considered way, taking account of the views of people who know about the subject, I think they need to look again at Tax Policy Making: A New Approach and be explicit with us.  There’s little or no debate on the Finance Bill any more, partly because all the supposed kinks in the wording have been worked out in the consultation process – but then that means there’s little or no input from MPs in their capacity as representatives of the Ordinary Citizen – or their capacity as stakeholders for Great Britain’s fiscal and economic health and welfare.  So is the point of the New Approach just to give those affected by a tax – the people who will pay it – a chance to say something about how it’s designed?  Or is it also intended to give those affected by the outcome of a tax – the people who pay their own taxes and who rely on the tax base to provide them with the common services the country uses tax receipts to provide, but who may not pay this particular tax?  Bluntly, are we trying to crowd-source (free of charge) the paid work that policy-making civil servants in the Treasury and HMRC used to do?  And are we doing so by asking the turkeys how to administer Christmas?

So I’m replying to all the tax consultations I can, even the ones where I’m not invited to do so – because I believe that the citizen is a stakeholder in all these matters.  And the other consultation which closed yesterday, the consultation on Life Insurance: Qualifying Policies said it only wanted to hear from “Insurance companies, Friendly Societies and Advisers involved in the sale or management of Qualifying Life Insurance Policies”.  Tough.

Here’s what I sent:

This is an individual’s response and will be posted, with commentary, on my blog, http://tiintax.com

You say that the people who should read the consultation are “Insurance companies, Friendly Societies and Advisers involved in the sale or management of Qualifying Life Insurance Policies”. I believe that the government’s intention in Tax Policy Making: A New Approach was to establish a methodology for making good tax policy which included consultation as its key element, and as a matter of principle I believe that all citizens are stakeholders in the design and operation of the tax system and therefore have a stakeholding in its development.

I have concentrated on the tax impact assessment as the best way of understanding the expected outcomes of the policy change and I see that the measure is expected to have a negligible impact on the exchequer and on the wider economy and I wonder therefore what the scale of the problem identified – of life insurance being used as a tax exempt savings vehicle – might be and whether it is cost effective to legislate. It seems very strange that, at this stage in the consultation process, you are not able to give a ball park figure of the kind of tax loss you are looking to stem and it is hard to see a justification for the enactment of legislation without this.

I also see that there is expected to be a “relatively small number” of individuals and households affected but no indication is given of how these investors fall on the spectrum of protected characteristics under the equality legislation. Is this a type of investment with a broad spread of investors where the closure of the opportunity to invest and gain higher rate tax relief will impact across the board or is it used primarily by any particular group? I am surprised you feel you have given due regard to equality issues without this information, particularly since the number of providers seems small enough that I would have expected there to be little difficulty in having or obtaining good quality information.

Nor am I at all clear what you think the impact will be on small firms. You admit there will be several providers who are small firms within the meaning of the government’s small firms impact test – have you held specific discussions with them on whether their customers are more or less likely to make use of the proposed limit? I’m not at all clear from the tax impact assessment therefore that the case for legislation is made.

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Not A Mansion Tax

August 24, 2012

Yesterday was the closing date for the consultation on “Ensuring the fair taxation of residential property transactions” or the Not-A-Mansion-Tax.  Because, as we all remember, the Lib Dems came into the coalition with a commitment to a “Mansion Tax”  (“Introducing a Mansion Tax at a rate of 1 per cent on properties worth over £2 million, paid on the value of the property above that level” P14).  This is not that policy.

What this is, is a proposal that people who own properties worth more than £2 million via an “envelope” – for example by owning an offshore company that owns the property in question – should have to pay stamp duty when the property gets transferred to someone else, and should have to pay capital gains tax when they sell the property even though the legal owner might be a non-resident company (non-residents don’t normally pay UK capital gains tax) AND there should be a bit of an annual levy on the value of the property over £2 million.  Not quite the promised mansion tax, then, but enough to get the lib dems off the cons’  backs perhaps?

Anyway, here’s what I said:

This is an individual’s response and will also be published, with commentary, on my blog, http://tiintax.com. I have addressed your consultation questions in turn.

Annual charge

Question 2.1 Do you think that the current criteria for the 15 per cent SDLT rate should also apply to the annual charge? If not, what exclusions or additions would you make to the coverage of the annual charge? Why would you recommend such changes?

Yes, I agree it’s sensible that the criteria should be aligned. As a natural person, a citizen and a taxpayer, I would be in favour of the criteria being aligned in as broad a scope as possible – personally I would include ALL non-natural persons and not just “certain” ones, for example.

Question 2.2 Is the exclusion for property development businesses sufficient both to address the risk of avoidance and to ensure bona-fide businesses are excluded from the charge? If not, what changes to the exclusion for property development businesses would you recommend and why? How could such changes be policed?

I think the exclusion for property development businesses is unnecessary and would be adamantly imposed to any relaxation of the current proposals. Personally I’d go for the simplest option here and have no exclusion at all – the charge is, frankly, minimal for a company which is genuinely developing property and would (a) be factored in to their costs and (b) prove an incentive, if only a marginal one, for them to get on with the development and bring the property back into use.

Question 2.3 How might it be possible to develop an exclusion from the annual charge for collective investment vehicles which distinguishes between widely-held funds and quite narrowly held ones (that might potentially be used for avoidance)?

As you will have deduced, I have little or no sympathy for exclusions or limitations to this charge, so I would be against any such potential loophole.

Question 2.4 Should the definition of ‘residential property’ be the same as that used for stamp duty land tax? (See Annex B). If not, what amendments or exclusions (in addition to those set out above) need to be made and why?

Yes. Simplicity is very much to be favoured in developing a policy where the sense of entitlement and privilege of the potential payers is such that they will be actively looking for arbitrage and avoidance opportunities.

Question 2.5 What, if any, policy issues do you see with the proposed application of the annual charge to properties which either move into or out of liability or to multiple property ownership interests? What rules for valuation and submission of returns of annual charges in these circumstances do you think will be most appropriate?

The simplest possible. Base the charge on the valuation at the five year point and simply keep it that way for the next five years. This has the advantages of simplicity and certainty, and the tax charge could simply then be factored in to any price on any change of interest in the interim.

Question 2.6 Do you think a prior agreement service along the lines described will be helpful to property owners? If so, what would be the best way for it to operate from a stakeholder point of view?

Of course it would. But whether this would be beneficial for the remainder of the taxpayer base is moot: in my view the costs of achieving certainty in this area should be borne by the potential taxpaying entities. However a “determined once and then remaining stable for five years” solution (proposed in 2.5, above) would minimise the need for such a service.

Question 2.7 Are there any other aspects of the valuation proposals that will cause difficulties or require further clarification?

Not that I am aware of.

Question 2.8 What length of time do you think is reasonable for submitting the annual charge return and why? Would monthly payment instalments be a more preferable option?

Normal rules, I would have thought? Monthly *payment* options, fine, but annual *returns* on the same schedule as everyone else.

Question 2.9 What will the impact of the annual charge be on (i) the high value residential property as a whole, and (ii) landlords and tenants? What evidence do you have to support your view?

If the charge were to discourage non-resident entities from buying up the top end of the residential property market I think this would be a positive outcome as the drag caused by the increasing prices at the top end of the market has a negative effect on affordability for actual UK residents.

Question 2.10 To what extent do you think the impact of the 15 per cent SDLT charge will differ from that of the annual charge? Should the Government continue with both measures once the annual charge is in place? If not, why not?

If the country is in a fiscal crisis which requires removing cost of living pay rises from public servants, charging civil servants more for their pensions, exerting downward pressure on disability payments, selling off playing fields and rationing cancer treatments, then I think it is completely fair that owners of multi-million pound properties should be required to make a substantial contribution to deficit reduction as well. I am wholly in favour of both charges and absolutely against any relaxation.

Question 2.11 Do you think there are any equality issues that arise for people with protected characteristics as a result of the proposed annual charge?

There is a strong possibility that the charge will weigh more heavily on non-UK citizens than on UK citizens. I think that is wholly proportionate to the level of fiscal crisis described by the government and to the nature of the entities to be taxed.

Capital Gains Tax

Question 3.1 Are there entities or forms of ownership whose status as an individual or non- natural person requires clarification?

Interesting question (to which I have no answer). But I look forward to reading the responses document!

Question 3.2 Are there entities or other forms of ownership, other than charities, which should either be relieved from or included within the charge?

Absolutely not. And I’m not at all sure about charities in this context!

Question 3.3 Would the introduction of a £2 million threshold create any particular difficulties or adverse behavioural effects? If so, what are these likely to be?

No doubt there would be the usual rash of sales agreed at £1,999,999 and attempts to value fixtures and fittings sufficient to put the property below the threshold but no more than for other property taxes.

Question 3.4 Would a limit to properties valued at over £2 million create any particular complexities? If so, what are these likely to be?

As for 3.3

Question 3.5 Would this cause any compliance difficulties for collective investment arrangements or where share ownership is heavily diluted? If so, please explain what these would be.

No opinion.

Question 3.6 Does the adoption of the SDLT definition of ‘residential property’ (in Annex B) create any problems? If so, what amendments or exclusions (in addition to those set out above) need to be made and why?

Again, I think this is a policy area where simplicity is very much to be preferred in the design of legislation, if only in order to eliminate future avoidance activity.

Question 3.7 Are there any other issues concerning the design or delivery of the policy that need to be considered?

Yes: how are you going to collect tax from a non-resident entity if it doesn’t make a return in the first place and doesn’t come to the UK? I would strongly urge a simplified procedure where any unpaid tax creates a charge on the property and leads, ultimately, to confiscation.

Question 3.8 Do you think there are any equality issues that arise for people with protected characteristics as a result of the proposed extension of the CGT regime?

No.

Kind regards

Wendy Bradley
http://tiintax.com

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Have I got news for you? (Well, have I?)

July 23, 2012

There’s been some very poor reporting of the speech David Gauke made this morning at the Policy Exchange – “cowboy” tax advisers will be forced to “name and shame” their clients, for example.  No they won’t, and, don’t be daft.  Some journalists need to do some research that doesn’t involve google once in a while.

The speech itself is interesting, though, in part because the Minister has a go at what’s acceptable and what isn’t in terms of tax planning:

Legitimate use of reliefs is not tax avoidance:

Claiming capital reliefs on investment is not tax avoidance – when those reliefs were introduced precisely to encourage the investment in question.

Claiming reliefs against double taxation is not tax avoidance – when the alternative would be taxpayers paying tax twice on the same income.

Claiming back tax on legitimate charitable donations is not tax avoidance – any more than ticking the ‘gift aid’ box is.

Not paying tax on your pension contributions is not tax avoidance.

Taking out a tax free ISA is not tax avoidance.

Quite.  (Although you then ask yourself why we then had the ill-conceived consultation on capping charitable tax reliefs…???)  

Buying a house for personal use through a corporate entity to avoid SDLT is avoidance.

Channelling money backwards and forwards through complex networks for no commercial reason but to minimise tax is avoidance.

Paying loans in lieu of salaries through shell companies is avoidance.

And using artificial ‘losses’ deliberately accrued to claim back tax is avoidance.

To which we say “yes!!!!” (And, when are you going to give HMRC the resources to do something about it??)

Where, though, do we find the announcement that leads to the “name and shame” the “cowboys” headlines?  Well, a consultation IS announced:

Today we consult on ways to improve the information available to the public on avoidance.  Publishing warnings for all to see, and making it easier for taxpayers to see if their adviser has promoted failed avoidance schemes in the past.

(which, you will note, suggests that it’s information about advisers that might be made public, not about their clients)

Let us turn, then, to the Tax Updates and Consultation Tracker helpfully provided by HM Treasury, which lists as To Be Published in July a consultation on “Disclosure of tax avoidance schemes (DOTAS)” Hmmm…. the accompanying PDF helpfully elucidates that this will be

Consultation on extending the DOTAS hallmarks so as to capture avoidance schemes that do not currently have to be notified.

Because, as anyone who works in tax would already know, there is already a regime which says that, if you’re going to market an avoidance scheme, you have to tell HMRC about it.  You have to give it a reference number, and you have to tell the people who buy the scheme from you what the reference number is, and they have to include the reference number on their returns.  Avoidance, not evasion, remember?  These are people who are trying to outsmart the taxman, not hide from him.

So have I got news for you?  Or, to put it another way, is this consultation “news” at all?

Well we don’t know what it’s going to say yet, do we.*

But…

Well…

Look at the briefing note which the Law Society produces for its members, telling them what their responsibilities are if they are the promoters of a scheme and reassuring them that they aren’t going to be asked to violate their professional ethics by disclosing privileged information and they aren’t going to be caught by the legislation if they simply give advice to their clients on a scheme that someone else is promoting.

And turn to section 9, “more information”, and the list of legislation on disclosure of tax schemes.  There are thirty two of them.  So far. Including

I seem to recall that David Gauke said, in the foreword to Tax Policy Making: A New Approach that

Business and tax professionals have previously criticised the tax policy making process as piecemeal and reactive, pointing to the wide range of policy announcements in recent years that have been unexpected and insufficiently thought through.

We could discuss whether this vast train of DOTAS legislation is the result of “piecemeal” policy development that hasn’t been sufficiently “thought through”, or is a sensible use of an iterative approach.  Or we could just say that it’s the tax authorities and the tax avoiders playing whack-a-mole.

As the Minister himself said in his speech today:

There are some who might say that consultation documents on tax administration are often an effective cure for insomnia, but this is one consultation that will keep the promoters of aggressive tax avoidance schemes awake at night.

Um… are you sure, Minister?

 

[*Update: not twenty minutes after I’d posted this, I saw in my twitter feed a tweet from Tax Journal which had a link to the consultation itself.  So we DO know what it says.  But – having read through it – I’m afraid the rest of this still stands.  Sorry and all that.  Oh, and could someone from the Treasury please explain why they bother having a tax consultations tracker at all if it isn’t up to date, please?  Thanks!]

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Only connect

June 25, 2012

Today the PCS – the Public and Commercial Services union – in HMRC – is on strike (or, as Sky news helpfully has it, “Jimmy Carr inspires thousands to walk out“)  The strike is in protest at cuts in HMRC staffing and to what they call “creeping privatisation” including two trials of using commercial services to replace HMRC call centre staff.  At the same time there is a lot of political noise about abolishing various benefits such as housing benefit for the under 25s.  The thinking around this is presumably that they can always go home to Mummy and Daddy, can’t they – an astonishing display of privileged thinking from the people who have never had an actual proper job in their lives.

Twitter, as ever, summed it up in 140 characters: ” Cutting housing benefit to under 25s might save you £2bn.  Well done.  Collecting the tax will save you £76 bn.  Happy to help.”

Only connect.

Meanwhile, here is the response I sent last week to the consultation on “possible changes to income tax rules on interest” – yes, I responded to all the ones that closed on Friday, I just didn’t have time to blog about it last week!  But there is a connection to today’s action, in that this is yet another consultation document that has a sloppy impact assessment that doesn’t make any compelling case for change, which is of course the point of doing the thing in the first place.  There’s an inbuilt cost to businesses and the rest of us in making any change to tax law at all – the cost of people having to learn about the changes and implement any changes to their own systems when they could otherwise be spending their time making widgets and earning profits.  So it’s one of the basic tenets of better regulation that you only make changes when the benefits justify the costs.

Is the current crop of consultations a bit woolly on the whole cost/benefit analysis side because they’re just going through the motions of consultation, or have they genuinely not got the resources any more to do the basic analysis work that ought to underpin any changes to legislation?

Anyone?

Possible changes to income tax rules on interest: consultation response

Dear Tony

This is an individual response to the consultation and will also be published over the next couple of days (with commentary) on my blog, http://tiintax.com.
I cannot see that the case is made for any changes to take place.  Although the impact assessment shows a 200m exchequer impact on the possible withdrawal of an exemption for intra-group Eurobonds, the remainder of the proposals are said to lead to “improved rules on the taxation of interest and interest-like returns” but what the “improvement” represents is not clear and there is no quantification of any impact on individuals, businesses or HMRC.  There is no cost/benefit analysis which would justify the change, and no compelling case for change is made elsewhere in the document.
It also seems to me that this is a consultation which would have benefited from a step back and look at the whole interest question in the round – the consultation is said to cover “the income tax rules on the taxation of interest and interest-like returns” but not to cover proposed “changes to the procedures for the collection of income tax deducted at source by companies, local authorities and individuals”.  Why not?  Wouldn’t it have been sensible to have looked at the taxation of interest – all interest – at once and made much more radical simplification?