The Treasury Committee launches an inquiry into the shifting sands of UK tax policy and the tax base.
Call for written submissions
The Treasury Committee invites written submissions addressing the following points:
The making of tax policy
- To what extent, if at all, has the Treasury complied with the principles of tax policy, set out in the annex?
- Have the entities involved in tax policy (HM Treasury, HMRC and the Office for Tax Simplification) performed adequately?
- Does the Treasury have the expertise to design tax policy? Does it make effective use of HMRC advice?
- What simplification measures, whether or not considered already by the OTS, now need examination?
The problem of the shrinking tax base
- To what extent is the UK’s corporate tax base being eroded as business is increasingly conducted globally?
- Are there particular sectors that are more mobile and do those sectors make a disproportionate contribution to overall tax yield?
- What other changes are occurring in the UK tax base, and how should the UK Government react to these changes?
Radical solutions to the problem of the shrinking tax base
- Given the inevitability of some sort of tax gap and of differences in interpretation of the "correct amount of tax", should the Government address the problem of the shrinking corporate tax base through more radical changes to the tax system?
- If so, what type of corporate tax structure could ensure that revenue is collected in accordance with the principles of tax policy and in a way which minimises the risk of base erosion? For example, should business taxation be based on turnover rather than profits?
- Should the Government consider other forms of taxation (such as the proposals of the 2020 Tax Commission) when considering how to raise tax in the future, particularly from businesses and wealthy individuals?
- Is there a case for a wholesale review of capital taxation?
Other mitigations of the problem of the shrinking tax base (addressing tax avoidance and non compliance)
- Have the recent initiatives (GAAR, the accelerated payments regime and notifications under the Disclosure of Tax Avoidance Schemes) been effective in tackling avoidance?
- To what extent will projects such as the OECD’s Base Erosion and Profit Shifting (BEPS) project and common reporting standards help in tax collection?
- What further international cooperation is required?
- March 2015 Budget contained a challenge for the tax professional bodies to take a greater lead in setting and enforcing clear standards around the facilitation and promotion of avoidance. Is that likely to succeed in encouraging more responsible behaviour from tax advisers? Do tax advisers need to be regulated?
- What, if anything, should be done to maintain or improve a culture of compliance or a sense of tax morality among the full range of taxpayers?
The administration of tax
- Has the merger of the Inland Revenue and Customs and Excise been a success, and have there been too many subsequent reorganisations within HMRC?
- Are the Treasury’s and HMRC’s plans for "Making Tax Digital" (as set out in the "roadmap" published on 14 December 2015) adequately designed and acceptable?
Send a written submission through the UK tax policy and the tax base inquiry page
Rt Hon Andrew Tyrie MP, Chairman of the Treasury Committee, said:
"This is an inquiry into how tax policy is made, how tax collection is administered and how to address the vulnerability of the tax base.
The complexity of tax law is turning what should be a straightforward principle – that everybody should pay the correct amount of tax – in to a piece of elastic. For corporation tax, for instance, the problem is exacerbated by the globalisation of economic activity and any liability to tax that accompanies it.
A corporation’s duty to shareholders will be to minimise its tax liability. It should be the duty of those making tax policy to find better ways to limit the elasticity. Google may be the symptom, but it is not the cause.
There is a lot the government could be doing. Tax policy must be made more practicable and the tax system more coherent. Tax needs to be fair. It needs to provide more certainty and stability. There is a lot to do and a lot for the Committee to examine."
The Treasury Committee published a report on the Principles of Tax Policy in March 2011, recommending that tax policy should:
- be fair. We accept that not all commentators will agree on the detail of what constitutes a fair tax, but a tax system which is considered to be fundamentally unfair will ultimately fail to command consent.
- support growth and encourage competition.
- provide certainty. 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. Certainty about tax requires
i. legal clarity: Tax legislation should be based on statute and subject to proper democratic scrutiny by Parliament.
ii. simplicity: The tax rules should aim to be simple, understandable and clear in their objectives.
iii. targeting: It should be clear to taxpayers whether or not they are liable for particular types of charges to tax. When anti-avoidance legislation is passed, due regard should be had to maintaining the simplicity and certainty of the tax system.
- provide stability. Changes to the underlying rules should be kept to a minimum and policy shocks should both be avoided. 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.
- The Committee also considers that it is important that a person's tax liability should be easy to calculate and straightforward and cheap to collect. To this end, tax policy should be practicable.
- The tax system as a whole must be coherent. New provisions should complement the existing tax system, not conflict with it.