The ‘totally bizarre’ finance bill process

Tax professionals welcomed the government’s decision, reached after cross-party talks, to drop most of the measures in the 762 page finance bill. Most of the measures removed from the bill are likely to be reintroduced after the general election, allowing more time for scrutiny and debate.

MPs raced through the remaining measures, running to about 140 pages, on 25 April. Royal assent is expected today.

The finance bill process is sometimes bizarre. As the SNP’s Kirsty Blackman noted, this time it was “totally bizarre”:

We were going to have two days of Committee of the whole House, something like six Public Bill Committee sittings and two days for Report stage and Third Reading. As it is, it has all been squidged into three hours or so, with the opportunity for it to last for five hours. It has been totally bizarre.

The bill was reduced from 135 clauses to 63, and from 29 schedules to 11, in less than three hours. More than 50 government amendments to the bill were approved, with little or no debate.

Much of the action took just seven minutes, as you can see here (between 14.48 and 14.55).

Truncated finance bill omits key corporate tax measures

The longest ever UK finance bill completed its House of Commons stages on April 25 after members of Parliament agreed to remove some of the bill’s most complex measures, including provisions on hybrid mismatches and relief for corporate losses and interest.

The controversial Making Tax Digital legislation was also removed from the bill, which will be considered by the House of Lords on April 26 but cannot be amended further. The amended bill, likely to run to about 140 pages instead of the original 762, will become the first finance act of 2017 …

The government could easily have pushed harder to retain many of the corporation tax measures on the basis that there had been full public consultation, Jeremy Cape, tax partner at Squire Patton Boggs, told Tax Analysts. The original bill contained some of the most complex provisions ever seen, and in some respects represented “the most fundamental shift in the basic tenets for corporate income taxation in a generation,” he said, adding that rushing the bill through in its entirety would have been a “damning indictment of the wholly inadequate process for the proper scrutiny of finance bills.” Read more:

My news story for Tax Analysts, April 26 (paywall)

Publishing corporate tax returns would achieve nothing, UK tax experts say

A Labour government would seek publication of tax returns made by “all medium and larger corporations,” party leader Jeremy Corbyn told journalists, prompting tax experts to call for more clarity in public debate …

The party had said in an April 15 release that Labour would “change company law to make sure the largest corporations publish their tax returns in full.” The release made no reference to medium-sized companies. Tax Analysts asked the Labour Party for clarification and to say how it defines a “medium corporation” for this purpose, but no response was received by press time …

Careful use of terminology in the public debate could promote better understanding of tax issues, Stephen Herring, head of taxation at the Institute of Directors, told Tax Analysts. The IoD has noted that the terms “small” and “medium” in relation to companies are often used loosely. Read more:

My news story for Tax Analysts, April 22 (paywall)

UK tax professionals urge caution in finance bill ‘wash-up’

Experts have urged the UK government to defer the enactment of most tax measures in the longest-ever finance bill, which is set to complete its remaining House of Commons stages in a single day on April 25.

The bill completed its second reading in the House of Commons after four hours of debate on April 18. Jane Ellison, financial secretary to the Treasury, told members of Parliament that following the surprise announcement of a June 8 general election, the government hoped to hold constructive discussions with opposition MPs on how the bill would proceed …

The Making Tax Digital measures in the bill are “really quite sketchy,” Anita Monteith, technical tax manager at the Institute of Chartered Accountants in England and Wales, told Share Radio on April 21. Read more:

My news story for Tax Analysts, April 22 (paywall)

Errors in the tax gap debate

Last week the Labour party drip-fed (with an eye on the local elections) a series of policy announcements including a pledge that a Labour government would require “best practice” in tax compliance from companies bidding for government contracts. Now we are heading for a general election and, whatever we make of the various parties’ tax policies, it is clearly helpful if care is taken to ensure accuracy when citing official figures.

A press release declared on 15 April that there would be “nowhere for tax dodgers to hide”, as Labour would “make giant corporations’ tax returns public”. (A reviewed commissioned by the party had called last year for publication of large companies’ returns.)

The press release said: “The ‘tax gap’ between the tax is collected and the tax expected is estimated by HMRC to stand at £36bn.” It went on to say that Labour would “pour the disinfectant of sunlight on large company accounts, helping close down the loopholes and the scams that the tax dodgers rely on”.

What the release did not say was that HMRC estimates that £3.7bn of the £36bn relates to corporation tax.

The Guardian headline on 15 April was: “Labour plans clampdown on ‘sweetheart deals’ to close £36bn tax gap.”

The paper reported the shadow chancellor as saying that “the ‘tax gap’ between what companies should be paying and what is actually received by the exchequer amounts to some £36bn”.

As Maya Forstater explains here, this kind of error is likely to hinder rather than improve public understanding of complex tax issues, at a time when there is a need for better understanding and informed debate to support sound tax policy decisions.

And we’ve been here (or almost here) before:

The tax gap and Labour’s review of HMRC

Double counting in the UK tax gap debate

Errors like these don’t help to restore trust in the tax system. We need those citing HMRC’s estimate of the total tax gap to avoid giving the impression that one group of taxpayers is responsible for all of that gap.

 

Revisit Making Tax Digital measures after election, UK tax experts say

Making Tax Digital measures in the current finance bill should be among those postponed to make way for the general election on June 8, tax experts told a House of Commons Treasury Committee hearing that began minutes after Prime Minister Theresa May’s surprise snap election announcement on April 18.

Treasury Committee Chair Andrew Tyrie observed that “when an election is called, large sections of the budget are excised in hurried negotiations between the [government and opposition] front benches and a concertinaed finance bill is pushed through on an agreed basis, in order to ensure that the public finances are not put at risk.”

Later on April 18, Financial Secretary to the Treasury Jane Ellison introduced the second reading of the finance bill. She told members of Parliament that she expected to have “constructive discussions” with opposition parties on how the bill will proceed. Read more:

My news story for Tax Analysts, April 19 (paywall)

Watch: Treasury Committee hearing April 18

Labour leader warns against UK ‘tax haven’ strategy

A Labour government would give HM Revenue & Customs more resources to tackle tax avoidance and would increase corporation tax for large companies, party leader Jeremy Corbyn said as he reiterated his view that the government is planning to turn the UK into a “low-wage tax haven.”

Corbyn criticised the government’s approach to the Brexit negotiations and pledged that a Labour government would require “best practice” in tax compliance and workers’ rights from companies bidding for government contracts. The Labour Party, which is struggling in the opinion polls, made several policy announcements as campaigning began in local council elections, where the party is expected to suffer significant losses …

Chancellor Philip Hammond told members of Parliament in January that the government would do “whatever it takes” to maintain competitiveness if the U.K. faced economic damage due to being closed off from the single market. Hammond was responding to questions about an interview with the German newspaper Welt am Sonntag. Read more:

My news story for Tax Analysts, April 14 (paywall)

UK Treasury rejects call for tax expert input in finance bill debates

HM Treasury welcomed ideas for improved scrutiny of tax measures but rejected a recommendation that members of Parliament examining annual finance bills consult tax experts before commencing line-by-line scrutiny.

More needs to be done to improve scrutiny of tax measures to build on recent progress, said House of Commons Treasury Committee Chair Andrew Tyrie in an April 11 statement, adding that he will continue to press the government to introduce oral evidence sessions. The move was one of 10 recommended steps for improving tax policy making, set out in a joint report from the Chartered Institute of Taxation, the Institute for Fiscal Studies, and the Institute for Government in January.

Financial Secretary to the Treasury Jane Ellison told Tyrie in a March 30 letter that she was “not persuaded at present by the merits of delaying the [finance bill] programming to allow for oral evidence sessions.” Read more:

My news story for Tax Analysts, April 13 (paywall)

Treasury Committee: More needs to be done on improving tax policy making