Making effective tax policy
Susan Cattell outlines ICAS recommendations for facilitating the development of effective tax policy.
What has ICAS recommended?
Maintain a single fiscal event
A single fiscal event facilitates good consultation, which in turn assists the development of effective tax policy. Due to the general election and COVID 19, the fiscal timetable has recently been disrupted but going forward the Government should stick to an Autumn Budget and retain the associated timetable for consultation, draft legislation and the Finance Bill. ICAS supports the principles set out in the 2017 policy paper ‘The new Budget timetable and the tax policy making process’ which were designed to increase predictability, stability and simplicity in the UK tax system and to address concerns that tax policy making was often piecemeal and reactive. A single autumn fiscal event is also essential to support the devolved nations in making effective tax policy.
Ensure that more consultations adopt all stages of the 2011 consultation framework – and act upon the responses
The five stage approach to consultation set out in the 2011 ‘Tax Consultation Framework’ is effective when adopted in full. The government, HMT and HMRC should ensure that more consultations include all five stages; omitting Stages 1 and 2, which frequently happens, deprives the government of valuable stakeholder input in clarifying the objectives, identifying the options for implementing them and developing a framework for implementation.
Issue ‘roadmaps’ to set out a clear strategic path for different areas of taxation
The 2010 ‘Corporate tax roadmap’ should be taken as a model for setting tax policy for the future. It set out the government’s long term approach to the corporate tax regime and for several years there was clarity and consistency around the direction of corporate tax policy.
A new roadmap for corporate tax is long overdue. However, clear tax strategies also need to be developed for other parts of the tax system – and to address long term challenges. These include:
- the growth of the gig economy and the workplace of the future
- removing incentives for tax driven incorporations
- making devolved taxes work effectively, given that they interact with UK taxes
- strategic direction for capital taxes and their interaction with taxes on income
- VAT in a post-Brexit world.
Avoid piecemeal, reactive policy-making to facilitate tax simplification
An effective approach to tax policy making could also contribute to the simplification of an excessively complex tax system – or at least to preventing further complexity being added. Piecemeal, reactive policy-making inevitably results in greater complexity, particularly when overall tax revenues need to be maintained.
The benefits of adopting our recommendations
- Facilitating a workable consultation timetable based around one fiscal event
- Supporting the proper use of the devolved tax powers in Scotland and Wales
- Clarifying policy objectives and increasing the likelihood of effective legislation which is less likely to need retrospective correction
- Providing taxpayers with certainty and stability so that they can plan with confidence; for businesses this encourages and maintains investment in the UK and for individuals it facilitates planning for life events, like retirement
- Offering the possibility of meaningful simplification in the longer term
Join the debate
The recommendations in the ICAS Future of Tax paper were agreed by the ICAS Tax Board in 2020 and inform the work of ICAS Tax. They will be reflected upon and revised to reflect economic, social and political developments.
There are also opportunities to join ICAS tax committees to discuss these recommendations and many other tax policy and practical matters – email firstname.lastname@example.org to find out more about being a committee member.