The most common complaint heard from tax practitioners is about the volume of legislation that they face. New research by the Tax Justice Network, UK shows that this is unjustified. 41% of all tax legislation comprises anti-avoidance measures designed to tackle tax planning schemes created and sold by tax practitioners.
The research was done by Richard Lupson-Darnell CTA on behalf of the Tax Justice network and looked at the purpose for enacting every section and schedule of all 1503 pages of tax legislation in the Finance Acts passed in the period 2004 to 2006. It found that just 48 pages dealt with routine issues like tax rates, 841 were the result of government driven initiatives and 614 were anti-avoidance measures.
Given that substantial parts of all new initiatives are anti-avoidance clauses, seeking to control abuse from the outset it is likely that 50% or more of all legislation is designed to curb tax abuse promoted by tax advisers.
Richard Lupson-Darnell said "The tax avoidance industry and tax advisers in general are constantly complaining about the volume of legislation they have to contend with. However, this research shows that they and their clients have to take a lot of the responsibility themselves. They have a choice to make; continue camping over the boundary of what the Government considers acceptable with the result of more legislation, or retreat to more compliant pastures and see the volume fall"
Richard Murphy, Research Director of the Tax Justice Network UK and a practicing chartered accountant added "This research adds much needed perspective to the discussion on the growing volume of legislation. It's clear that much legislation is being driven by the need to tackle tax avoidance promoted and sold by the UK's lawyers and accountants. That also influences the design of new initiatives, which could be much shorter if the government knew they would not be abused the moment they were
introduced."
Richard Murphy added "We think it's time these professions stopped moaning about the volume of tax regulation in this country and recognised the major role they play in its creation. What is clear is that much of the burden of tax legislation is self inflicted on UK business or is there to stop the practices its advisers promoted. When this is appreciated we hope that a new and more constructive dialogue on tax management can be opened between government, taxpayers and their professional advisers from which all will benefit. Until this happens and whilst the professions continue to antagonise and abuse the government ordinary business will suffer this volume of legislation".
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OK, so how much of that stuff was to deal with issues reslulting from poorly drafted legislation, or legislation with unintended consequences? And how much of it was actually aimed at avoidance schemes dreamt up by professional accountants. This research is a work in progress rather than a finished product – much to early to draw meaningful conclusions.
Alastair
When the legislation was to amend stuff that had not worked – such as revising the film rules, we gave it the benefit of the doubt and called it new.
No one claims 100% accuracy when using judgement, but this research is unambiguous in its findings. As much new law is to tackle tax abuse as it is to develop systems appropriate for a modern economy.
We think that conclusion unavoidable.
Richard
But I think you highlight the problem with research like this. I could commission research of a similar nature and come up with a different conclusion. You inevitably get the answers you seek.
For example if you phrased this to be about the amount of legislation that is written to sort out badly drawn up legislation you would probably get similar results, but a different headline. You are placing the blame on tax avoiders, I am pointing at the legislators.
But we would both be missing the point, which is that there is no “conceptual framework” on which our tax legislation is drawn up. It is bound to fail.
Richard – where’s the hypothesis that supports this conclusion? Like alastair, I can easily come to an alternative answer. Without additional research that has a basis in science, this is just a bunch of facts.
And as an aside, it’s not clear, but I guess you’re posting a press release?
I think we need to see which 614 pages have been identified as “anti-avoidance measures”. I can think of some measures (such as FA 2006, Sch 20) that many would regard as implementing a change of policy (government withdrawing longstanding and well-known favourable treatment, written into the legislation, of certain trusts) rather than anti-avoidance, but I understand that it is included.
[…] This morning, Tax Justice Network released the results of research designed to discover how much tax legislation is devoted to anti-avoidance measures. The research says 41% – a pretty big number. The researchers conclude: The tax avoidance industry and tax advisers in general are constantly complaining about the volume of legislation they have to contend with. However, this research shows that they and their clients have to take a lot of the responsibility themselves. […]
[…] 41% of all UK tax legislation tackles tax avoidance […]
There is nothing else apart from the tax legislation – how are we supposed to know where the acceptable boundaries lie, given that Gordon changes his mind each time he stands up to give a PBR or BR?
The treasury definition of “Anti-avoidance” seems be a series of steps, following the legislation as it currently stands, which leads to less tax been paid than would have been paid through another route. Why would any company choose to pay more tax?
[…] Last week TJN-UK published a press release on research undertaken on its behalf by Richard Lupson-Darnell. […]
I appreciate your point about legislation being needed to address tax planning but surely the best way for HMRC to discourage “aggresive” planning would be to publish statistics showing that the plans don’t work i.e. the tax payers end up paying the tax because the scheme is defective. Unless of course most of the plans succeed in which case I guess the HMRC wouldn’t want to advertise the fact!
Mark
I agree! I ask for prior clearance arrangements as part of a general anti-avoidance provision
Richard
[…] And yet at the end of his time in office Gordon Brown is the Chancellor of the most populous tax haven in the world according to an IMF study. The passing of the Income Tax Act 2007 has made the UK tax legislation the bulkiest in the world, the volume of legislation having doubled since Brown came to power in 1997. An estimate by the Tax Justice Network suggested that at least 40% of all tax legislation from 2004 to 2006 was directly related to tax avoidance, suggesting the issue has far from gone away. And there are frequent suggestions that Britain is now the tax haven of choice for the world’s mega-rich, only three of the top ten in the Sunday Times rich list for 2007 having actually been born in the UK whilst those featured in that list have seen their wealth increase by an average of 260% over the last ten years in contrast with an average 120% wealth increase for the population as a whole. […]