Tax Faculty responds to Tories

A leading tax body has written to the Conservative party expressing its concerns that the UK tax system is too complicated and stating that it is in need of urgent simplification.

The Tax Faculty, part of the Institute of Chartered Accountants of England and Wales, has responded to the Tories' first three policy papers on tax, which covered income tax and NI thresholds; stamp duty on property and capital gains tax.

These are part of a series of eight consultation papers from the Conservatives which set out a number of suggestions for tax reform. The most recent trailed a proposal to abolish IR35 and reform Section 660.

In responding to the first three, the Tax Faculty explained that it must adopt 'an apolitical stance and therefore tax policy issues are ultimately a question for the Government.'

Accordingly, it was not able to make detailed comments on the tax policies which underlie the papers but did express its concern with the implementation of UK tax policy.

In a letter to Stephen Dorrell, Chairman of the Tories' Tax Reform Panel, the Tax Faculty said: "A few years ago, we developed a set of principles which we have found very helpful in analysing whether new UK tax legislation is of a high standard. Our 'Ten Tenets for a Better Tax System' have stood the test of time."

It enclosed a copy of the Ten Tenets and offered to meet to discuss the tax proposals.

Ten Tenets

The Tax Faculty said the tax system should be:

• Statutory: tax legislation should be enacted by statute and subject to proper democratic scrutiny by Parliament.
  
• Certain: in virtually all circumstances the application of the tax rules should be certain. It should not normally be necessary for anyone to resort to the courts in order to resolve how the rules operate in relation to his or her tax affairs.
  
• Simple: the tax rules should aim to be simple, understandable and clear in their objectives.
  
• Easy to collect and to calculate: a person's tax liability should be easy to calculate and straightforward and cheap to collect.
  
• Properly targeted: when anti-avoidance legislation is passed, due regard should be had to maintaining the simplicity and certainty of the tax system by targeting it to close specific loopholes.
  
• Constant: Changes to the underlying rules should be kept to a minimum. There should be a justifiable economic and/or social basis for any change to the tax rules and this justification should be made public and the underlying policy made clear.
  
• Subject to proper consultation: other than in exceptional circumstances, the Government should allow adequate time for both the drafting of tax legislation and full consultation on it.
  
• Regularly reviewed: the tax rules should be subject to a regular public review to determine their continuing relevance and whether their original justification has been realised. If a tax rule is no longer relevant, then it should be repealed.
  
• Fair and reasonable: the revenue authorities have a duty to exercise their powers reasonably. There should be a right of appeal to an independent tribunal against all their decisions.
  
• Competitive: tax rules and rates should be framed so as to encourage investment, capital and trade in and with the UK.

For more information see: Tax Faculty response to Conservative Party tax consultation