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UK tax law is among the most complex in the world, and it has been getting more complex every year. Despite the fact that I earn a fair amount of my income advising on tax matters I welcome the announcement by Chancellor George Osborne of the establishment of the Office of Tax Simplification.

The problem with UK tax law is that it has for too long been used as a political tool and it has been administered and designed to appease special interests and Her Majesty’s Revenue & Customs (“HMRC”) zealots.

Being based on Common Law any tax legislation introduced by a government is interpreted by the Courts and is subject to centuries of legal precedent (legal judgements in court cases which are binding on later cases). Poor drafting and the “law of unintended consequences” has meant that legislation which started out being fairly simple is continually tinkered with, making it much more complicated than it needs to be. This is usually because someone like me has found a “loophole” which legislators want to close.

It doesn’t seem to have occurred to legislators that if they keep things simple and keep tax rates low there will be little point in people trying to find loopholes.

Whilst welcoming the establishment of the office I do have some concerns as to whether it will be allowed to be effective. I don’t believe it will be unless the following points are addressed:

  1. The Office must be genuinely independent. It must take evidence from the Treasury, from HMRC and from outsiders, on the same basis. There must be no special access for the Treasury or HMRC, and no cosy relationship between the staff of the Office and those government departments.
  2. The Office must report publicly on all the ideas it has looked at that are worthy of serious consideration, including those that contradict Government policy.
  3. It has been announced that the Board of the Office will comprise four members, two of whom will be from the Treasury and HMRC. This raises concerns that the Office may be steered away from topics that Ministers might find “challenging”.
  4. Private sector practitioners will be seconded to the Office but these will need to be fairly senior tax practitioners who won’t be bullied by the Treasury or HMRC and who must be entirely free to keep up a completely open dialogue with their colleagues in the private sector.
  5. The establishment of consultation committees and the publication of their minutes is a good one. But as with the secondees, members of these committees must be free to have completely open dialogues with others.

Most importantly, the Office’s work must lead to action. It is good that reports will be laid before Parliament, and that Parliamentary committees will be able to conduct enquiries. But it is vital that Ministers be required to respond in detail to all the Office’s proposals, setting out the precise economic or technical reasons why each rejected proposal is being rejected.

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Category: Taxation

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