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A new report has suggested ways in which the next Conservative government can 'revolutionise' the making of tax law and establish a 'simpler and more transparent' tax system.
This can be achieved, says the paper, through the establishment of an Office of Tax Simplification and a new Joint Parliamentary Select Committee on Taxation, and through the introduction of stricter rules governing the introduction of tax technical legislation.
The report is the result of a study by a working party chaired by former Tory chancellor Geoffrey Howe, set up last year by shadow chancellor George Osborne to take forward the recommendations of the Conservative's Forsyth Tax Reform Commission regarding the making of tax law.
It notes that the 'UK tax system has become hugely more complex during the last decade and now cries out for simplification' and that 'complexity not only adds to compliance costs and uncertainty, but it also undermines public trust in the tax system itself'.
Over the past decade, claims the paper, 'the capacity of Parliament to scrutinise tax legislation has been overwhelmed' and a number of recent tax controversies have 'served to undermine the reputation of the UK as a stable environment in which to work, save and invest'.
In response to this situation, the working party makes three main recommendations for the next Conservative Government
- Establish an Office of Tax Simplification (OTS) to examine the existing tax code and make proposals for simplification. The OTS would operate in a similar way to the National Audit Office, reporting to a new Joint Parliamentary Select Committee on Taxation and overseen by a Steering Committee appointed by the Chancellor of the Exchequer. As well as staff from HMRC and academia, the OTS should also include individuals from the tax professions to provide expertise and a fresh perspective.
- Launch a new Joint Parliamentary Select Committee on Taxation, with membership drawn from both Houses. The new committee would examine and make recommendations on proposals presented to it by the OTS. It would have no power to initiate tax changes nor to erode or compromise the exclusive privilege of the Commons when it comes to the rates and incidence of taxation.
- Introduce a strong, new convention that any changes to tax law with technical content should be proposed no later than the Pre-Budget Report before the Finance Bill in which they are to be included
'Together', adds the report, 'we believe that these reforms would revolutionise the framework within which we make tax law, and over time would help to deliver the simpler and more transparent tax system that we so desperately need'.
George Osborne announced the publication of the document by pledging that the next Tory government will instigate the working party's recommendations.
'The result will be that simplification becomes an embedded feature of tax policy,' he said.
'It will also mean better tax law as we bring more expertise to bear on legislation. And it will mean no more stealth taxes. The Government will no longer be able to bury the bad news in the small print.'
The Association of Chartered Certified Accountants (ACCA) welcomed the recommendations as 'timely and practical, offering solutions to bring back much-needed trust in tax arrangements'.
ACCA chief executive Allen Blewitt commented: 'The Working Party's proposals… are sensible measures that aim to tackle the unfairness and uncertainty which has bedevilled the UK's tax regime, especially in recent times.
'There can be no more rushing through of last-minute tax legislation. Creating a culture of consultation and openness is therefore vital.
'That is why ACCA particularly supports the idea of the Office of Tax Simplification - but it must be more than a commentator or overseer of the tax system,' he added.
'Similarly, the cross-party Joint Parliamentary Select Committee on Taxation is a commendable suggestion. Again, both establishments must be seen to make change, not just talk about it, or the lack of trust in the UK system will still remain.'
