Dawn makes an appearance at the Chartered Institute of Tax

A recent article buried in the accounting pages of the Times gave an interesting, but altogether unsurprising insight into the relationship between the permanent officials of the Inland Revenue and the elected politicians who control the Treasury.

As Paymaster General, Dawn Primarolo is the elected politician responsible for managing the Treasury and in this capacity, was invited to speak at the Tax Advisers Address, a new event organised by the Chartered Institute of Taxation. Ms Primarolo attended with one of her senior permanent officials, Steve Matheson, deputy chairman of IR. According to the report, Dawn Primarolo made her speech and left, (allegedly due to Parliamentary commitments and not because the audience were preparing questions) leaving Mr Matheson to represent her on the panel for the Q&A session. According to the report, this sharing of roles gave the audience a clear insight into divisions between the parties on key issues.

In her speech, Ms Primarolo explained that apparently the Government wanted the tax system to be as neutral as possible. She demonstrated this by giving the official view of consultation. The Accountancy Article in the paper sums up the speech as follows:

If something was an anti-avoidance issue, the Government would simply not consult, and if it was not an anti-avoidance issue, the Government would consult. There is an element of guilty until found innocent in this. However, it does reflect a deep seated view that anyone trying to arrange their affairs to pay the minimum, rather than the maximum, tax possible is somehow an evil member of society……There was a clear hint that if the Government didn't want to consult, it would pretend that the issue was an anti-avoidance one. Her conclusion was that what people wanted and required was a stable economic environment to work within.

Steve Matheson then took the stand. He immediately made it clear that the broad-brush Treasury approach propounded by Primarolo was the politicians' approach. He reminded the audience that politicians do not have to deal with the practicalities, complexities and difficulties of the tax system. Matheson then agreed with Adam Broke (past President at Institute of Taxation) who suggested that tax complications arise when politicians depart from the objective of raising revenue to cope with the expenditure and insert measures less concerned with raising revenue and more concerned with trying to engineer social change. All the evidence suggests that tax systems are spectacularly unsuccessful at doing this, but it doesn't stop politicians from trying.

The discussions moved on rapidly to the subject of tax avoidance – which of course is legal. Matheson's view was that Ministers were against avoidance as it distorts the market. When the assembled tax experts pointed out that the current Government views tax avoiders on a par with drug smugglers, Mr Matheson observed dryly that the difference between avoidance and evasion was 'the thickness of a prison wall'. Matheson then finished by saying that

'The Chancellor is sure that the he knows what avoidance is' whereas after all his years working for the Revenue, Matheson was 'still not sure'.

If the Revenue admit to being confused, what sort of message does that send to independent contractors trying to run companies? Especially in view of Dawn Primarolo's wish – and the main objective of any Government – for a stable, economic environment.