Friday, April 2, 2010

Finance Bill 2010 proves Parliament doesn't decide our tax laws

Publishing the Finance Bill 2010 on 1 April was always going to look like a bad joke. Even more so if Parliament is about to be dissolved for a General Election.

Commentators, eg: the ICAEW Tax Faculty and CIOT, are rightly critical of how little time will be available to debate the Bill before it becomes law. The common consensus being that there will be just 3 days to 'consider' the 167 pages containing 73 sections and 22 schedules. These include detailed and complex legislation related to 3 brand new taxes: the bank payroll tax, a duty on landlines and the 'high income excess relief charge' on pension contributions. The latter is so needlessly complicated it could easily have been designed by the March Hare from Alice in Wonderland. There are also many other contentious tax changes that go way beyond those necessary by reference to the Provisional Collection of Taxes Act.

This pre-election Finance Bill simply provides the purest evidence of something many of us have long suspected when it comes to tax law. It rarely receives adequate Parliamentary scrutiny.

When trying to interpret complex tax law we are often referred back to the alleged 'intention of Parliament'. In my view this is commonly used as a cloak to hide the 'objective of HMRC' when the rules in question were drafted. The small (if any) amount of Parliamentary time, in the House or in Committee, focused on the issues in question is rarely considered. We are instead presented with the circular argument that if we have a law then that law accords with 'the intention of Parliament'. NO IT DOESN'T!

I've never been convinced that in most such cases the MPs (or even the Treasury Ministers) always understand all the related issues. How could they in fact? Our tax system is overly complex and few MPs understand the process sufficiently to debate the key issues from a position of knowledge.

And if the current Finance Bill 2010 passes into law within the next week we will have prima facie evidence of the lack of Parliamentary scrutiny that tax law invariably receives. In future let no one attempt to argue that Parliament decides our tax laws.

Back in 2008 I attended a 'Making taxes simpler' presentation at the ICAEW. This was when George Osborne and Lord Howe first announced a new Conservative policy to establish an Office of Tax Simplification (OTS) and also a Joint Parliamentary Select Committee on Taxation (JPSCT). I am well aware that each could end up as diverted from their task as was the recently axed Tax law rewrite project. But I'm hopeful that such developments, if they come to fruition, could lead to much needed improvements to our tax law making process and to some simplification of the system too.

What do you think?

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