Tax policy confusion ‘hugely damaging’, say City lawyers

Topics: City,Tax law,Government & politics

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City lawyers have accused the government of ‘hugely damaging’ reforms of tax legislation that ignore the importance of the rule of law.

The City of London Law Society revenue law committee has called for the creation of an independent body with the power to veto tax legislation.

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In a response to the Office of Tax Simplification’s competitiveness review, the committee says HM Revenue & Customs officials may have understated difficulties when briefing ministers.

At other times, policy has ‘clearly been driven from the political level without due considerations, with HMRC left to pick up the pieces’.

The committee response adds: ‘Whilst to some extent inevitable in a democracy, these phenomena are hugely damaging to the UK tax regime’s reputation for stability, and the creation of a constitutional check to limit the scope for them to occur would in our view be of real benefit.’

The committee noted that policymakers had made ‘great strides’ in improving the administration of corporation tax, but elsewhere too much legislation is being ‘produced in haste and then repented over at leisure’.

The response added: ‘The sense of policy confusion, especially when contributed to by frequent significant change after announcement, is very damaging to the UK as it undermines the objectives of delivering predictability and certainty.’

The committee, which is chaired by Travers Smith partner Simon Yates, called for a more realistic and open dialogue between ministers and officials about whether proposals are ready to be implemented.

Communication is a central theme of the response: the committee argued that for businesses that do not qualify for a customer relationship manager, interaction with HMRC is ‘problematic’, with what appears to be a ‘deliberate’ policy of not giving out direct line numbers or individual email addresses.

The response says a ‘disturbing pattern’ is emerging where legislation is introduced with ‘minimal or ineffective’ consultation.

Concerns are raised that tax policymakers are ‘insufficiently conscious’ of the importance of the rule of law and over-reliant on guidance. The current government, it adds, has legislated retrospectively against certain types of stamp duty land tax avoidance schemes even though they had been known to HMRC for some time.

‘We do not consider that this is acceptable. Businesses must know that the law in place when transactions take place will be the law that applies to them.

‘This principle is either absolute or it is nothing – once it has been broken once, further breaches are only questions of degree,’ the committee says. 

Readers' comments (12)

  • LMFAO!

    Yes, the answer is...........another "independent" (i.e. totally out of control) quango-which will look after its own interests, not anybody elses.

    To paraphrase Neil Kinnock, if the answer is another quango, then its a bloody silly question!

    The correct answer is application of political pressure, and lobbying of MPs, pointing out the political damge this will cause to them personally.

    And if the City of London Law Society is incapable of bringing pressure to bear, God help the rest of us!

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  • The constitutional principle of the rule of law also includes equality and fairness. Perhaps those individuals and corporations who are able to spend significant sums on lawyers to assist in developing new tax avoidance schemes would be better advised to spend the money on ensuring they pair fair taxes. The vast majority do not and cannot seek to avoid tax and accept the obligation which all the community has to contribute to promote the well-being of the community as a whole. When the gap between rich and poor is increasing and child poverty is predicted to reach 3.5m those wealthy enough to afford tax avoidance advice could bear in mind whether their actions whilst within the letter of tax law are also within the spirit of the law and consistent with their wider duty to the community.

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  • Anyone who takes out an ISA is doing tax avoidance. The deliberate blurring by the government of tax avoidance with tax evasion is despicable.

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  • Quite extraordinary. The idea that parliamentary control of taxation should be handed to an unelected "specialist" body and the concept of no taxation without representation holed below the water line. I have no doubt that the members of this committee are highly educated, intelligent and, at one level, thoughtful people. Can they please stop, reflect and think about astonishing suggestion they have made. Have they danced so long to the tune of international capital, and are they so unaware of the threat to democracy that it represents, that they wholly lack a perspective on what they say? I don't disagree with their view of much tax legislation as being poorly thought out. But the fact of the matter is that that legislation is, as David Williams points out, driven by the relentless tax avoidance "industry" of which the City law firms and accountancy firms are such ardent pushers. Cloaking their proposal in the dry and apparently dispassionate terms they do does not disguise the double-speak of their suggestion. When a need for tax legislation emerges who do the Government consult as "specialists in the area" but the City law and accounting firms. Quite why the gamekeepers (of both political hues) have concluded that the answer lies in appointing more poachers is baffling. The effect of this vicious circle is obvious. A small group of professionals has, in practice, exclusive insight to and influence on Government policy across all areas of taxation. Those professionals earn their living from huge organisations one of whose leitmotifs is to avoid the payment of tax wherever and whenever possible. The said professionals then engage in a series of intellectual gymnastics purporting to advise Government, often seconding key poachers into the gamekeeper's office. They then criticise the legislation which emerges and use their knowledge to contrive new avoidance techniques, all the while putting up a barrage of sound and fury, inveighing against the alleged iniquities of the policy and legislation in question. I wonder who might get appointed to this new quango if it were ever to be created.......?

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  • Is anyone able to point me to the source documents for this article, please? Thanks.

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  • Hello Marcella,

    There is a link in the Twitter feed section of the CLLS website:

    http://www.citysolicitors.org.uk/index.php?option=com_content&view=article&id=71&Itemid=464

    Best wishes

    John

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  • With all due deference to Mr Baggott I think most of us recognise the difference in principle between taking advantage of a clear tax allowance (such as an ISA) and creating a financial scheme that may meet the technical definition of the legislation but only by working in a wholly artifical and unconventional (in commercial terms) way. (I accept it can be very hard to know at what point avoidance becomes 'aggressive' in this sense, which is why it is so hard to prevent).

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  • It's very simple. If there was a sweeping and general anti-avoidance provision, the tax system would work and the rich would be less able to dodge tax by legal or illegal means.

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  • What kind of constitution law challenged lawyers would advocate that an independent body be set up to supplant the legislative powers of Parliament? It is hard to believe the lawyers of the City of London Law Society can be so out of touch.

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  • These "City Lawyers" appear to be anonymous. Who could actually believe that they can be this perverse. This just sounds like another progression along the Goldman Sachs Corporate State ideology. Where Democracy and Universal Justice are replaced by legalised fraud.

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