A leading tax body has called for major changes to the way that proposed new tax laws are examined by parliament. In a submission to the House of Lords Constitution Committee the Chartered Institute of Taxation (CIOT), which represents tax advisors, called for lawmakers to put legislation under greater scrutiny, saying that “Parliament has an important job to do and it could do it better.”
Recent years have seen a raft of new and increasingly complex tax rules introduced, some of which have resulted in scandals, for example as ContractorCalculator.com reported this week, last year’s changes to IR35 have seen nearly all public sector contractors ruled inside IR35, despite results from the CEST tool showing that 54% should be outside.
John Cullinane, director of tax policy at CIOT, sees the problem as a combination of politics and parliamentary rules: “With a few honourable exceptions, MPs on the Finance Bill Public Bill Committee take little part in proceedings; such debate as there is, can often be characterised by political knock-about rather than diligent technical scrutiny,” he said. “The absence of meaningful House of Lords scrutiny of Finance Bills during their passage means that flaws in Commons scrutiny are all the more glaring.”
Unlike non-finance bills, new tax laws are not voted on by the upper house, which only holds a short debate on them for peers to comment on the legislation. The rule, which dates to 1911, is designed to make sure that the unelected chamber cannot block an elected government’s programme by choking off funding. Pointing to the number of peers with deep experience of taxation issues, Mr Cullinane wonders if a compromise could be reached. “The history of this is well-known and we would not want to return to a situation where an elected government, commanding a Commons majority, can be blocked by unelected peers from raising the money it needs when it has made a clear political choice to raise those funds,” he said. “We think that, with a bit of imagination, there is potential for a greater role for the Lords in this area, enabling peers to, in effect, suggest changes to Finance Bills, and require the Government to respond to their concerns, while ensuring that the elected House’s basic tax policy choices cannot be frustrated.”
As well as more involvement from the Lords, CIOT also want to see the Commons committees tasked with examining Finance Bills take evidence from outside experts. Pointing to cross-party support for the proposal, CIOT also suggests that Parliament should hear from those who will be affected by new legislation. “Giving the Finance Bill Public Bill Committee the opportunity to take evidence from, and question external witnesses, at the start of their proceedings could really help them get to grips with the legislation they are scrutinising,” explains Mr Cullinane.
Other suggestions in CIOT’s submission include that the committee examining the Finance Bill should liaise more closely with Parliament’s standing Select Committees, allowing them to take advantage of those committees’ regular investigations and examinations of underlying issues. They also suggest that the Office of Tax Simplification, which advises government on making tax laws simpler should publish a simplification review of the proposals alongside the committee stage.
Effective changes are unlikely, or at least a long way off, CIOT’s submission is to a procedural committee, and any recommendations it did make would need to be adopted and approved by MPs. Some change is surely necessary though, if future tax laws are not to be bogged down in the sort of confusion that has overtaken tax changes of the past two decades.