Making tax law simpler and better

George Osborne joined Lord Howe at the Institute of Chartered Accountants today to launch Howe's report into tax simplification and scrutiny. Click here if you'd like to read it in full, although Labour's Treasury ministers apparently felt able to dismiss it without doing so.

Howe's working party - which included a former paymaster general, a former senior adviser in the Treasury, and a leading tax QC - was tasked with taking forward the Forsyth Commission's recommendations on the making of tax law.

Reform is clearly needed, within the last year we have overtaken India as the country with the longest tax code in the world. Howe's article in the FT today is worth reading. The report's three key conclusions rare:

• Establish an Office of Tax Simplification to examine the existing tax code and make proposals for simplification. The OTS would operate in a similar way to the National Audit Office and would be a powerful institutional pressure for simplification of the tax system.
• Establish a new Joint Parliamentary Select Committee on Taxation in order to address the lack of sufficient parliamentary scrutiny of tax legislation.
• Establish a 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. This will help filter out badly thought through proposals produced with little consultation.

George Osborne said the "complex and unwieldy" Finance Bill for 2008 was a "sorry story of badly thought through proposals, complex initiatives and humiliating u-turns", and a case study in how not to make tax policy that showed the necessity of reform.

He praised the "excellent report" and announced that he would adopt the policies on creating an OTS and on announcing proposed tax changes earlier. He seemed to stop short of advocating the creation of a new Joint Parliamentary Select Committee however, by highlighting the existing work done by the Joint Committee on Tax Law Rewrite Bills and the Lords Economic Affairs Sub-Committee on the Finance Bill.

Osborne accompanied these endorsements with a call for "no more stealth taxes" in order to "restore trust in the tax system so that businesses and individuals can work, save and invest with confidence".

Comments

[Alan S]

One cheer from me.

Very welcome in its own right but inadequate.

We need to reduce the burden of tax AND its complexity.

George Osborne must face up to Britain's economic decline and the waste in the public sector.

[Opinicus]

This is far too new Labour.

What is an Office of Tax Simplification - Orwellian Newspeak, I expect?

We do not need an OTS, another Quango with minutes and salaries but a Chancellor, who means it and has his foot on the Treasury throat.

If we need another Quango, it is an Office for Quango Reduction with staff paid entirely by results, say 0.05% of all the money saved.

Then we might have some lower taxes and be careless of how complex they are.

[johnC]

And presumably the waste in the public sector would be exacerbated by the establishment of an Office of Tax Simplification and a new Parliamentary Select Committee.

Why can't this policy be carried through by exisitng Treasury officials ? It's what they are paid for.

[Saltmaker]

Simple taxes: enough to make any accountant vote Labour!

[Iain]

"Very welcome in its own right but inadequate."

We have an economy hitting the wall, as some of us have been predicting on this message board for a long time, and George Osborne talks about setting up a quango, you could almost weep in frustration.

[brian]

No - Osbourne is right. The first step to removing the endemic waste is to simplify everything to the point where we can fire 90% of the "jobsworths" that simply soak up public cash.

This "quango" can have a limited life, but its job is essential. The massively, overly complex system that we currently have needs to go and this quango's only job is to do that then, in the immortal words of Bendy-Wendy, "bring it on..."

[alan phillips]

Establish a 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. This will help filter out badly thought through proposals produced with little consultation.

The last sentence is enough to make me weep. It should read akin to; This will ensure that the process has been well researched and is sound in its design.

It may relevent to this government but I'd hope that the "Heirs inwaiting" wouldn't be in that position, I do agree with the sentiment though....

[John W]

Alan, I think you are nit picking. The former is merely politico speak for the latter.

[alan phillips]

John W. But given Brown's desperation, wouldn't it be a good idea, not to load his (water pistol) gun, he's used the comments of this site before...

[Mark Lee]

Two years back my frustrations with the complexities of the tax system led me to decide to give up giving tax advice.

I had arguably reached the top of my profession but was unwilling to continue the struggle that I am sure is also felt by many other accountants and tax advisers. Coincidentally today is the day that I have revealed (in Taxation magazine) the full extent of my frustrations and how I fear that the tax system is falling into disrepute. My leading 'Comment' article is a response to someone who, shocked by my story, described it as "a sad indictment of the tax system'.

I have not previously explained publicly why I, a former Chairman of the ICAEW Tax Faculty and partner in two top firms of accountants, gave up giving tax advice. As explained in my article I should stress that I have not abandoned the profession and now run an independent network of tax advisers. I also remain involved in Institute activities but giving tax advice myself is a thing of the past.

I'd like to think that if we already had a functioning Office of Tax Simplification that things would be different.

[Watervole]

Great idea from Osborne. I really like that man.

Alan S has already expressed exactly what I feel. If we were a company, rather than a country, the board would be laughing like drains at a business case that says it is ok to spend more managing the money than the capital so generated.

Slash and burn Osborne. One of the Baltic countries did a very sensible thing and reduced the tax system to the absolute minimum and sorted out their probs in a very short time (sorry haven't got the reference, might be Estonia or Lithuania.)

HMRC already has a backlog of 6 months work that they can't process and we have it on good authority that they are throwing away paperwork from case files, when the file gets too big to store. They never answer any correspondence and trying to get any consistent criteria from them is a joke. You never get the same answer twice.

Let's get rid of bureaucracy - it costs too much and its slowing this country down.

I suppose it's too much to ask to get rid of VAT?

[dogface]

I have been increasingly convinced in recent years that the ever-growing complexity of my tax return is aimed at making me employ an accountant and pay VAT on his fees.

[Jake]

"Click here if you'd like to read it in full, although Labour's Treasury ministers apparently felt able to dismiss it without doing so."

I've often wondered at the marvellous speed of Labour's auto-rebuttal machine.
Now I know why.

[Mark Williams]

The idea of simplification of taxes is welcome, but it would be absurd to expect anybody from the legal or accounting professions to drive this is naive. Senior tax counsel (names supplied on request) make £1.5-2 million a year whilst technical tax partners at trhe big 4 accounting firms charge £800-1,000 an hour. Why would they push for simplification?

[C List and Proud]

Er?

Was I wrong to expect some proposals on making taxes simpler and better? This is just an exrecise in thinking about which navels to gaze at!

I know we cannot have firm proposals at this stage because of the state of the economy and the real prospect of any good ideas simply being nicked by the vacuum that passes for Chancellor of the Exchequer, but can we please have some signposts?

I'm sure it is possible to say that we would look to have higher starting rates for NI and Basic Rate tax and lift the starting point for top rate. It is an indication of the direction we want to go, not a sepecifc pledge, but it is getting harder and harder to stand on doorsteps and not be able to answer the simple question, "What would you do, then?"