tiintax

There’s a consultation closing today on whether it’s a good idea to apply a reduced rate of VAT to cable cars.  This is because, under the arcane VAT rules (and why do we never talk about setting up a European Tax Simplification Office to simplify THOSE, eh??) cable cars might “count” as public transport – which is zero rated – but the individual cars “count” as the unit of measure and, typically, hold fewer than ten passengers, so “count” as individual vehicles rather than public transport.  And, because the EU won’t let countries introduce new zero rated categories for VAT, the best the government can offer by way of untangling this anomaly is to introduce a new 5% rate of VAT on cable car traffic.

Got that?

Well yes, it’ll go some way to ending an anomaly and will cost nothing, will do some good to Scottish ski lifts and tourists heading up the Great Orme, won’t do anyone any harm, so yes, let’s get on with it, right?

Hmmm.

Well first of all, the government’s ambition is to simplify tax, not make it more complicated, right?  And adding another exception rate band category to VAT will complicate, rather than simplify, the system as a whole.

Secondly, the government is committed (well, at least it was the last time I looked) to using better regulation tools in order to achieve better tax policy.  One of those tools is the tax impact assessment.

Yes.

Let’s look at that one for a bit, shall we?

Exchequer impact – negligible

Economic impact – negligible

Impact on individuals – depends whether the operators choose to pass on the VAT reduction or not.  (Are we taking bets???)

Equalities impact: “no equality groups have been identified as being impacted by this change”.  Uhuh.  Where, exactly, did we look?  I’m sorely tempted to put in a Freedom Of Information Act request for the data underlying this assertion, because I strongly suspect that there was a thought experiment that went something like:

• “It won’t have an equality impact, will it?”
• “Nah!”

But I may be being unnecessarily cynical – after all, how could you tell the difference between a bland statement based on real solid research and one based on airy nothing?  Let’s assume that this statement is factually based and simply flag up that maybe there’s something of a flaw in the system there, then, shall we?

Impact on businesses – Now this is the bit that interests me.

There are cable-suspended lifts within the five Scottish ski resorts, and in a further three skiing areas in England. In addition, there are cable-suspended lifts located elsewhere in England and Wales. The reduced rate will only apply to the small number of such systems where they are not subject to the exclusions mentioned in section 2, or covered by the existing zero rate.

Now I’m sorry, but wouldn’t you expect at some point there to be some mention of this?  And by “this” I mean the extraordinary Emirates Airline cable car linking Greenwich peninsula and the Royal Docks Olympics sites.

I mean, am I being just an old cynic in wondering whether this high profile high risk investment was the prime mover behind this “tweak” to the VAT rules?  I have no idea, genuinely – but then I’ve just read the consultation, and I really ought to, don’t you think?

Next there’s the impact on HMRC – negligible, right.

Finally other impacts.  Now, if you read this blog regularly you’ll know I have a bit of a Thing about small business and the government’s warm words about how they’ll “think small first” and how often that is simply ignored in practice.

Well here we say:

Small firms are likely to be affected by this change, and again, we would welcome feedback on the potential impact.

Aw, isn’t that nice?  Warm words again, welcoming our input.

Well, no it isn’t, actually!  This change was announced in the Budget, the legislation is attached to the consultation document, and it’s to become law in, presumably, next Spring.  As the condoc itself says

This consultation is being conducted in line with the Tax Consultation Framework. There are 5 stages to tax policy development:

Stage 1 Setting out objectives and identifying options.

Stage 2 Determining the best option and developing a framework for implementation including detailed policy design.

Stage 3 Drafting legislation to effect the proposed change.

Stage 4 Implementing and monitoring the change.

Stage 5 Reviewing and evaluating the change.

This consultation is taking place during stage 3 of the process.

So this isn’t an early-days “here’s a problem, let’s think how we can solve it” kind of consultation.  It’s a “this is the legislation: does it work in the way we think it does” final stage of policy development, the last stage before the thing goes live.

So at this point HMRC ought to bloody well know what the likely impact on small firms will be, and it shouldn’t have got this far without doing the work of finding out.

Similarly the impact assessment says:

Any policy change will also be tested against the list of possible impacts used in regulatory impact assessments. The full list of these “other impacts” is set out in Annex A of Overview of Tax Legislation and Rates available from http://www.hmrc.gov.uk/budget2012/ootlar.htm

The policy change “will be” tested?  When?  And what earthly use will it be when the change is a fait accompli?  Will the change encourage more people to use cable cars?  Will that encourage people to build more cable cars?  Are cable cars a sustainable form of transport?  So will changing the VAT rate that applies to them have some impact on carbon emissions?

I give up.

I do notice, however, that there’s a more than usually thorough section on evaluation and how and when the change will be evaluated.  Goodness.

I am cynical enough to think that there’s been some shift in the Whitehall Better Regulation methodology that has put a new emphasis on evaluation, at the same time as taking the foot off the pedal with respect to small firms.  I’ll be having a look at the next batch of tax impact assessments with more than usual interest to see if the evidence bears this out.