Posts Tagged ‘government’

h1

In which I am grumpy and middle aged about the government’s ability to manage the consultation process

January 28, 2013

Anything happening?

Have the Treasury updated the tax tracker since December 7th?

Erm… that’d be a “no“.

Has the government decided to follow the advice of the House of Lords Secondary Legislation Scrutiny Committee and appoint someone like the NAO to undertake an urgent review of their changes to consultation policy?

Erm… that’d be the people who accused them of “sneaking” their consultations out just before long holidays?  Unlikely.

If they DO decide to review the changes, are they planning on meeting the House of Lords suggested deadline of reporting by Easter?

“We believe that the process needs to be reviewed urgently.  We are calling for the review to be done by an independent organisation such as the National Audit Office, and for the outcome of the review to be published by Easter.”

Erm… given it’s practically the end of January now and Easter is in, what, 61 days (and that’s calendar days, not working days) I leave that question for discussion.  Please use one side of the paper only, and be careful to show your workings in full.

h1

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.

h1

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.

 

h1

A no brainer.

December 6, 2012

Anyone with a home worth over £1million now facing a visit from elite tax inspectors” Well, up to a point, Lord Copper!

Let’s have a look, shall we?

The announcement was of a further 100 staff for the “affluence unit”, the bit of HMRC that looks at the tax affairs of people with more than a million quid. As the Telegraph article says

The unit, comprising 200 investigators and technical specialists in six locations across the UK, focuses on people who are evading or avoiding tax.

And, looking for the official announcement that was the initial impetus for this non-story, I see that Danny Alexander announced the unit was expanding from 200 to 300 staff, and with a remit to look at people with £1 million rather than, as before, £2.5 million.

OK then.  So how many millionaires are there?  The Treasury press release estimates half a million but – going back to The Telegraph, where we started – that seems to be a pre-crash figure and their current estimate is 280,000.  I’m not saying I prefer the Telegraph’s figures to the Treasury’s, you understand!  But let’s be generous and take the lower figure.

So we have 300 HMRC staff looking into the tax affairs of 280,000 people.

280,000 divided by 300 is 933.333 according to my calculator.  So let’s round it down and say each of these HMRC staff deals with the tax affairs of 900 millionaires.  Yes, according to the Telegraph’s own figures each worker in the Affluent Unit will need to spread their investigative powers over 900 millionaires.  According to the Treasury’s, over perhaps twice that.  Where on earth will they find the time to go nosing around blameless individuals whose houses have just drifted up in value?  It’s scaremongering, forget about it.

What is more interesting is the announcement that HMRC will have more resources in the autumn statement.  It’s here, in line 32 of the policy decisions:


 £ million
 Head 2012-13 2013-14 2014-15 2015-16 2016-17 2017-18
+
32 HMRC investment Spend -10 -80 -25 0 0 0

Ten million in the current year, eighty million next year, £25m in the final year of the coalition and then zilch.  Hmmm… David Gauke’s written ministerial statement on December 3rd clarified this a bit: the 100 staff for the affluent unit are in there, plus some warm words about transfer pricing and centres of excellence.  But the figures are a bit off:

 A further £77 million will be provided to HMRC in this spending review period to further expand its anti-avoidance and evasion activity focused on offshore evasion and avoidance by wealthy individuals and by multinationals.

Well, 10+80+25 = 115 in my book, so if HMRC are getting 115 million and using 77 million on anti-avoidance and evasion, what are they going to use the other  38 million on, do we think?  I’m sure it’s hidden in the small print somewhere but I haven’t come across it yet – anyone?  (maybe they’re upping the £42 they can spend on each business for RTI by another, erm, sixteen quid apiece?)

But look here, at the ARC union website.  Now, ARC stands for Association of Revenue and Customs senior staff and it’s the branch of the FDA which covers senior staff in HMRC, tax inspectors, lawyers, senior managers and a bunch of other professions, economists and the like.  And they have a paper, Reducing the UK Tax Gap – Proposals from ARC. (which isn’t exactly prominent on the site, but if you look at the entry for December 3rd you’ll find it in the “notes for editors” from a press release they apparently put out on 30th November, presumably by leaving it in the statutory locked filing cabinet in the basement office marked “beware of the leopard”!)

What interests me is the suggestion that you could put resources into HMRC’s legal services:

Additional legal resources, 150 trained lawyers and 50 legal assistants, to accelerate litigation of the Tribunal backlog and accelerate yield. Cost £35m. Projected yield £2000m

One of the things that worries me about the extra hundred staff for the affluent unit is, where are they going to come from?  Because trained tax professionals don’t actually grow on trees, and HMRC has always been rubbish at planning for the future and making sure it has enough trained tax professionals coming online to replace natural wastage from retirements and resignations.  You can’t just go out and hire a hundred trained tax professionals – largely because the accountancy profession, where you might find people with at least analogous skills – pays a damned sight more than HMRC.

But you could go out and recruit a hundred and fifty lawyers tomorrow.  Because lawyers train themselves, or at least pay for their own training, and there are supply and demand issues in the legal profession which there aren’t in tax at the moment.  So you couldn’t find 150 trained tax lawyers – they get shedloads more than HMRC tax lawyers, I’m told.  But you could get 150 criminal lawyers, trained litigators, and start taking some of the backlog of tribunal cases to tribunal as fast as the tribunal could accommodate them.

ARC think an investment of £35m could bring in two thousand million.  And HMRC seem to have £38m left over, so it’s a no brainer, surely?  Why on earth not?

h1

Consultation on vulnerable beneficiary trusts

November 9, 2012

Trying to catch up with the flurry of October/November consultations, I see I missed one that closed yesterday.  I’m hoping that, closing on Thursday, they’ll still be able to consider responses that they receive on, erm, Friday!  Anyway, this is what I sent.  I’m not sure whether there’s anything in the changes to tax treatment of trusts for people who are unable to manage their own financial affairs that is, by and of itself, offensive – I’m aware that it’s the changes to the benefits themselves (replacing DLA with PIP) which are considered offensive by people with disabilities.  But there are two things that jump out at me about this consultation.  One is the governmental, or rather departmental, muddle.  If you have different definitions of disability or vulnerability in different departments and for different purposes, should you – in the twenty first century, for goodness’ sake – expect a government to be able to get its act together and define what it means for ALL its purposes, not just for some?  Or, if that gives too much of a cliff edge between categories, shouldn’t you at least let the tax treatment follow the definitions used for other purposes rather than making people faff about considering a whole new set of tax requirements for something that isn’t really anything to do with tax at all?  And, second… the consideration of equality seems to be rubbish.  I say “seems to be” because, to be charitable, it’s possible they’ve done a ton of great work behind the scenes but just written it up really badly.  But to me it  reads as if they’ve gone “Oh, the DWP did all that.  Just stick in an “it’s all right, isn’t it?” question and leave it at that.”  Tell me I’m wrong.

Anyway, this is the response I sent.

I appreciate that the closing date for this consultation was in fact yesterday but I hope you will nevertheless be able to include it in your considerations. This is an individual’s response and will also be published, with commentary, on my blog at http://tiintax.com. Please note there are some questions where either I consider I do not have sufficient expertise to contribute to the discussion or else I have covered the question separately in narrative and I have therefore excluded those questions (so the numbering below doesn’t follow, but IS the numbering taken from your consultation document)

Q2: Do respondents have suggestions for defining a ‘vulnerable person’ for tax purposes other than by reference to orphaned minors and those with a severe physical or mental disability? (Responses may include approaches and concepts found elsewhere that could be included into the tax code either in combination or in isolation.)

It seems quite plain to me that tax is the least of the matters which a vulnerable person ought to be concerned with, and that therefore the best way of implementing the objective of this consultation is for the tax treatment to “follow” – in other words, that the legislation defining people to whom these tax exemptions should apply should follow the other defining legislation.

In other words, government should get its act together and define vulnerability for all purposes, or at least work under the presumption that meeting a definition for one purpose would also meet it for all other government (or at the very least for tax!) purposes.

In drafting terms, you might say something like “A vulnerable person for these purposes is someone in the Vulnerable Persons list,” and then have a separate command paper or other statutory instrument kept up to date with the definitions found elsewhere in the law. So the first “vulnerable persons list” might read
– persons in receipt of enhanced rate PIP
– persons [defined as in the enhanced criminal record certificates legislation]
– persons listed in the [relevant provisions of the] Safeguarding Vulnerable Groups Act 2006

Q3: In relation to those suggestions, what practical issues do respondents envisage applying them in the context of a self-assessed tax; and how could they be overcome?

In practical terms, there are three things government should do

1. not require self assessment from a vulnerable person but from their trustees
2. not require self assessment from the trustees of a vulnerable person except at (say) five yearly intervals or when there is a material change in circumstances, and
3. set up and resource fully an assistance unit within HMRC devoted to providing vulnerable persons and their trustees with direct assistance in self assessment, including but not limited to a dedicated mailing address and the provision of the telephone number, email address and other contact details of a named person in HMRC who will provide them with assistance

Q4: Do respondents agree that including recipients of the enhanced rate daily living component of PIP within the vulnerable person definition would achieve certainty in the same way the existing reference to DLA does?

Yes, but would restrict the number of people included in the vulnerable persons group as that is one of the design objectives of moving to PIP. This should NOT be one of the design objectives of this legislation, so the definition needs to be broader, and therefore to “follow” other definitions of vulnerability.

Q6: What are respondents’ views on whether the proposal for PIP might lead to a suitable test, or part of a test, for assessing whether someone should be able to benefit from access to the tax treatment for vulnerable persons’ trusts? (Responses should have regard to the characteristics that distinguish a vulnerable person.)

PIP is intended to apply to fewer people than the current benefits regime and therefore the definition of a vulnerable person would be unreasonably restricted if this were the ONLY qualification for treatment as a vulnerable person. See response to 2, above – in my view the definition should follow any other definition in current legislation, so that a person defined as “vulnerable” for ANY government purpose should also be defined as vulnerable for tax purposes.

Q7: Is the existing ‘mental incapacity’ test suitably targeted? If not, why not?

No opinion, but didn’t you consult on this very recently, in the consultation on removing the offensive language (“lunatic”) from the Taxes Acts? Is it necessary to revisit at this point, and if so I strongly suggest you re-examine the responses to the previous consultation.

Q8: What alternative approach would respondents propose and why? (Responses need not be limited to suggestions that make use of MCA05.)

See above. Follow the definitions in other legislation so that there is no separate “hurdle” for tax.

Q10: Do respondents see any reason why the ‘application of capital’ conditions should not require the vulnerable beneficiary to benefit from every application of the capital during the lifetime (or other relevant period) of the vulnerable beneficiary (with consequent changes to the provisions disregarding trustees’ general statutory powers of advancement)?

As a lay person, I’m surprised this question needs to be asked. But, for the avoidance of doubt, no!

Q11: Do respondents see any reason why the ‘application of income’ conditions should not be harmonised so that trustees are prevented from paying income to non-vulnerable beneficiaries during the lifetime (or relevant period) of the vulnerable beneficiary?

As for Q10!

Further comments

I am surprised that the consultation has reached this stage – where you are publishing draft legislation – without the equality impact assessment being at a more developed stage. The statutory requirement is for departments to give “due regard” to equality while making changes and the phrasing of the EQIA suggests work to examine the potential equality impacts has not yet been conducted. Presumably this is merely unfortunate phrasing of the consultation and you have already given regard to equality in putting forward these proposals for consultation? In particular I am aware from the press that there is considerable controversy over the changes to benefits which have led to these proposals – surely in order to give due regard to equality YOU would need to consider the equality impact of THESE changes and not merely rely on the EQIA published by DWP and referenced at 8.8?

Tax Impact Assessment. Again, the equality impact assessment seems nugatory, no consideration is given to any HMRC changes (such as the possibility of providing more or better assistance to affected persons and trusts in dealing with self assessment) and the consideration for monitoring and evaluation does not seem to allow for the possibility of effective *review* of any changes to see whether they are effective.

Regards

h1

Tax is not regulation. Discuss.

September 19, 2012

All right, I admit it, I’m baffled.  Well, more than usually baffled.  I mean, I know I haven’t been in HMRC for three whole months now, but when I was last there the rules were that tax changes were excluded from the Impact Assessment process because they had their own, the Tax Information and Impact Note.

So, er, why have we published an Impact Assessment for the proposed changes to the Gift Aid scheme?  Have we decided it doesn’t count as a tax?  If it’s not a tax, is it a regulation?  Or what?

h1

Wouldn’t it be nice…

September 14, 2012

…if we treated our paralympians and other fellow citizens with disabilities or terminal illnesses the way we treat our tax avoiders?  I’ve just written a long post, below, in response to a consultation about the General Anti-Avoidance Rule Notion.  I just wanted to pick out one small aspect of that suggestion, the proposed definition of abuse.

Tax arrangements are “abusive” if they are arrangements the entering into or carrying out of which cannot reasonably be regarded as a reasonable course of action, having regard to all the circumstances…

This is called the double reasonableness concept: it’s not enough that the action is reasonable, it also has to be reasonable to regard it as reasonable.

Wouldn’t that be a great way of re-testing disabled people to make sure they’re still entitled to disability benefits?  Say something like

Disability assessments are “abusive” if they lead to an action such as the removal of benefits which cannot reasonably regarded as a reasonable course of action, having regard to all the circumstances…

Just a thought.  (but the consultation on the tax GARN closes today.  You’ve still got time to drop them a line at study.gaar@hmrc.gsi.gov.uk suggesting they pass on their double reasonableness test to the DWP…)