Ahead of Philip Hammond’s first speech as Chancellor to the Conservative party conference later today, CIOT, the Institute for Fiscal Studies (IFS) and the Institute for Government (IfG) are urging him to make immediate changes to the way tax policy is made, saying it remains ‘hard to discern a clear strategy for key parts of the tax system’
The three bodies have sent a letter to Hammond based on the initial findings from a project they are running looking at how to improve budgets and tax, and are calling on him to signal a new approach.
The suggestions include a return to a single annual fiscal event, which the taxation experts say will put a stop to Autumn Statements becoming second Budgets, arguing that this is leading to a proliferation of measures and very long finance bills.
They also want government to start the consultation process for tax changes at an earlier stage, to avoid the surprises that lead to ‘costly errors and embarrassing U-turns’, and say there should be clear guiding principles and priorities set out, to explain the direction of travel for tax policy the rest of the Parliament.
In addition, the letter calls for extending the roadmap approach, pointing to a clear direction for the future in areas where individuals and businesses need to plan and make long-term decisions, such as pensions and savings, plus more work preparing the ground for future policy changes through external reviews to open up public debate about the tax system.
Bill Dodwell, CIOT president, said: ‘Good tax policy comes from an open, consultative process in which all those affected have a voice, and consultation starts at an early enough stage of the policy development process to be meaningful. The reforms we suggest would help achieve this. We hope the Chancellor will take them on board.’
Paul Johnson, Director, IFS, said: ‘The current system for tax policy making is not fit for purpose. Too many changes are sprung on the country in too many fiscal events with too little sense of direction, consultation or evaluation.’
The letter concludes: ‘There is a significant resource challenge for HMRC, financial institutions and taxpayers to digest the volume of technical tax change that has characterised recent years and to which Brexit seems likely to add. We believe that by reducing uncertainty and ‘surprises’ the changes we propose will reduce burdens and bring benefits to all those involved.’
CIOT, IfG and IFS will be publishing their full report on proposals for tax policy changes later in the year.
The letter to the Chancellor is here.
