The latest report from the government’s tax watchdog on the voluminous British tax code exposes the inconsistencies in our approach to tax but makes a worthy point, writes Sophie Mazzier
Within days of publishing the 2017 Finance Bill late last month – all 776 pages of it – the Office of Tax Simplification (OTS) published its own report. Just what we need, you may think: but this one makes interesting reading.
The OTS, which was set up in 2010 to provide advice to the chancellor on simplifying the UK tax system, has the objective of reducing compliance burdens on both businesses and individual taxpayers. A commendable notion, you’ll agree – but when the government also continues to publish highly complex financial legislation can it really be expected to achieve meaningful results?
Take the most recent Finance Bill as an example, published just seventeen days before the provisions are due to take effect; this is roughly equal to the entire compendium of tax legislation published in 1965 (which itself saw the introduction of capital gains tax and corporation tax).
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The government is aware of the contradiction. Presumably it was no coincidence that the recent bill was published not only at a time when most tax advisers were busy completing end of year tax planning, but also in the run up of Theresa May’s historic ‘trigger’ of Article 50. (That, incidentally, is very far from being an event without legislative consequences: the government admits it will necessitate the passage of between 800 and 1,000 Acts of Parliament, although not all these are tax-related).
So the OTS has it’s work cut out but the objective is laudable. Of course, I am aware of the possible contradiction of my bringing this up: a tax lawyer who favours simplification of the tax code is like a turkey coming out in support of Christmas. So what’s the way forward?
On the one hand, an oft-heard criticism levelled at the current tax code is its complexity. But interestingly, that problem can sometimes be best addressed not by shorter but, rather, by longer legislation. That can be clearer and easier to use – for instance the result of the Tax Law Rewrite Project has been the introduction of 2,413 pages of revised legislation. However, the new format and the use of plain English has made the legislation more logical and readable – at least for those new to tax. I should add that more mature practitioners have mixed views as the location of familiar sections are less easy to locate and familiar terms have been recast.
Conversely, many of the world’s best known texts are short, pithy and to the point. The Ten Commandments, for example, are a mere 288 words long and even the US constitution is 8,164 words long and that is including the Bill of Rights and all the subsequent amendments to date. The Gettysburg Address is only 272 words long.
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‘Length is not the key factor with legislation,’ opines the OTS at the conclusion of its latest report, ‘practitioners welcome concise legislation, but not at the cost of legislation that is clear, can be understood and applied and achieves its objective.’ It’s not the most penetrating conclusion, but perhaps it point towards a valuable truth. Like so many things in life, the tax code is a balance. All in all something that the government ought to be mindful of when it composes its next finance bill.
Sophie Mazzier is Counsel at boutique private wealth law firm Maurice Turnor Gardner LLP
