How do we achieve a better tax system?
Michelle Wyer gives a personal account of an evening event organised by Women in Tax on the anniversary of its inauguration.
That sounds ‘interesting’, I thought, signing up on Eventbrite and expecting to see lots of HMRC colleagues (I was the only one!). It was held in the very modern and posh Mazars building in the shadows of the Tower of London. As Women in Tax is largely a private sector group, there were, of course, canapés and wine; I chose sparkling water which I thought demonstrated high levels of self-discipline. There was a voice inside me shouting “Free wine! Free wine!” but I ignored her!
On the panel were Jill Rutter, Programme Director, Institute for Government, Jean Sharp, Head of Tax for Aviva, whom I had heard speak before and whom I had dealings with when I led the Senior Women’s Network. Also there was Anita Monteith, Technical Manager of the Institute of Chartered Accountants in England and Wales (ICAEW) Tax Faculty, and Charlie Matthews, Head of Advocacy at Action Aid. Sarah Prior, a partner at PwC, was the chair.
Naturally enough the session began by quoting Adam Smith from his 1776 Wealth of Nations, with his 4 canons of a good tax system: Equality, Certainty, Convenience and Economy. Fair enough. We were brought right up to date with Bill Gates’ view that, as technology takes away the jobs we need, we should get away from payroll taxes and move towards a progressive consumption tax.
Gill Rutter spoke of her experience of working with HMT. She focused on seven fundamental policy principles:
- Be clear about goals
- Be open to ideas generation and robust use of evidence
- Be rigorous about policy design – translate it into workable practice. She said that she thinks that there is too big a divide between design (HMT) and practice (HMRC).
- Engage with the outside world. All too often consultation is about the ‘how’ and not the ‘what’.
- Thoroughly appraise options – including using impact assessments.
- Are the role of central government and accountabilities clear? Here, she pointed to the cost of reliefs which are inevitably, she said, forecast far too low and no one ever checks if the costing was right afterwards. She added that we crawl over expenditure in Government but not on the cost of reliefs – an interesting challenge I thought.
- Finally, is the policy capable of evaluation?
Everyone seemed to be of the view that, in order to simplify the tax code, we should at least go back to just one fiscal event a year, rather than two. Gill thought that there should be some prioritisation and strategy around how you use that fiscal event. Later it was acknowledged that where the government can potentially change every four years, long-term strategic thinking can be challenging.
Jean Sharp spoke of her personal canons being:
- To thine own self be true (Hamlet, in case you’d forgotten)
- Maximise return on effort
- We’re all equals as human beings (tell that to Mr Trump!)
She gave us an interesting romp through her career in tax and the challenges she’d faced. Jean, and others, pointed to the fact that the ‘tax environment’ had changed and that now the profession was more about selling tax schemes – that was when she started to feel uncomfortable and moved from the Big Four to Norwich Union, as it then was. She spoke of her desire for a ‘low risk’ HMRC rating and an adult-to-adult relationship with HMRC. Her most radical suggestion was that we should rip up the tax code and start again; do fewer things but do them better. I’ve a lot of sympathy with that view. She did add that we should do that “one bite at a time”.
Anita Monteith suggested that Brexit might offer opportunities for reform and simplification. She expanded on Adam Smith’s four canons, introducing another six, as recommended by the ICAEW: easy to collect was one of them. She wanted to abolish child benefit altogether and give the money directly to schools. She pointed out that politicians would always be nervous of doing anything too radical.
She said that she appreciates that we have to ‘Make Tax Digital’, but the proposals shouldn’t be mandated and it needs a proper plan and time. Later, I managed to persuade a whole bunch of people that MTD was in fact an excellent means of simplifying the tax system, especially for those customers with turnovers of of less than £10k. She ended by stressing that employer NICs was massively under threat and was one of many people to mention the ‘gig’ economy (new to me), which I gather relates to the fact that agencies are now insisting that people become self-employed in the light of recent legislation. One of the reasons, I suspect, for the Employment Duties team being formed in HMRC. I know that when I worked on the National Minimum Wage it was a key ‘avoidance’ device for employers to use (see also simplification for those with a turnover of less than £10k).
Hearing Charlie Matthews from Action Aid was a refreshing change. She spoke about tax from a global perspective and about the way that it impacts on developing countries. She also referenced corporate responsibility for paying tax. She told the story of Marta in Ghana who runs a stall selling beer and snacks in her local market. There is a huge multi-global company just down the road who make the beer that she sells. Marta pays £9 a quarter in tax which is more than the multi-national pays! Makes you think. She spoke about the unpaid care burden, which largely falls on women even in the 21st century. She said that to improve it we need better public services which can only happen if more revenues are raised from everyone paying their fair share of the tax burden. She wanted a transparent tax policy linked to foreign development policy and to see corporate behaviour change.
Finally we heard from Sarah Prior, who focused on corporate choice. She advocated progressive improvement over time and tax transparency.
During the debate some interesting points were raised. Gabs Makhlouf (remember him?) got a mention. Apparently in New Zealand, where he is now based, along with Naomi Ferguson, John Middleton and Alison McDonald, there are no reliefs and low tax rates. We have to prepare people for change and balance the cost of a relief against the revenue raising intention (like a book-keeping account). The rationale for reliefs has been lost in the mists of time.
Some other interesting points were raised:
- Is simplicity even achievable or is complexity a necessary evil? Perhaps not, in a country where 17% of all adults are allegedly illiterate and innumerate.
- HMRC software has to be compatible.
- Simple shouldn’t be an excuse for lower.
- Individuals should be able to submit their tax return without an accountant.
- The UK wants US levels of tax and Scandinavian levels of service which can only result in a huge deficit.
- Capitalism is responsible for the complexity of the tax code.
It was a pleasant evening but I couldn’t help thinking that there was one question that remained unanswered: who are we achieving a better tax system for? Answers on a postcard please!