An independent group of tax professionals should report annually to parliament on whether new legislation complies with the rule of law, the Law Society’s tax committee recommended this week.
Publishing a position paper on tax and the rule of law, committee chair Gary Richards said that ‘legislative hyperactivity has become a permanent feature of our government’.
Last month, the committee, responding to a government consultation on strengthening sanctions for tax avoidance, said proposals for tougher penalties against serial users of disallowed tax avoidance schemes were premature and could threaten fundamental rights such as that of appeal.
The committee suggested this week that a new tax charter would set out principles relating to the rule of law and should include taxpayers’ right to access the courts.
Retrospective taxation was a ‘clear example of the breach of the rule of law’ and any form of legislation that took effect on a date before parliamentary procedures had been completed should be avoided, the position paper says.
The committee recommends that a protocol on unscheduled announcements of changes in tax law should be amended to set out the ‘wholly exceptional’ circumstances in which legislation that takes effect before the date of its announcement could be acceptable.
Proposals to allow HM Revenue & Customs to recover tax debts directly from bank accounts and to introduce a strict liability criminal offence for failing to declare offshore income should become law only if the legislation itself contains safeguards.
While the government’s adoption of a tax consultation framework in 2011 was welcomed, the committee said the five-stage consultation process was not always followed and was sidestepped by labelling a new tax measure as anti-avoidance ‘when it is no such thing’.
The Finance Act 2014, for instance, introduced changes to the way in which ‘disguised employee’ members of limited liability partnerships were taxed.
The committee said: ‘When this proposal was first published, it was an anti-avoidance measure. Following initial consultation, the nature of the proposal changed markedly and became more widely applicable to professional partnerships. This was not anti-avoidance legislation but, nevertheless, there was no formal consultation of the kind envisaged by the [framework].’
The committee recommended the framework be placed on a more formal, perhaps statutory, footing. An independent panel of advisers should also be established to advise the Treasury select committee on any proposed legislation.