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Mrs. Villiers: It is always difficult to draw a clear line between technical changes and policy, but the commission would make recommendations, they would be debated in the House and we would decide whether we wanted to go in that policy direction or not. It is as simple as that. The commission would make recommendations to simplify the system.
The tax system of any modern economy will be complex, but ours has reached heights of Byzantine complexity. The Finance Act 2004 holds the record for being the longest, with 328 sections and 42 schedules. The standard textbook on tax law hits the bookshops as a behemoth of about 11,000 pages. We need to address the problem urgently for a number of reasons, the first of which is lack of transparency, which my hon. Friend the Member for Cities of London and Westminster spoke about.
Complexity is such that the tax system is incomprehensible to the vast majority of ordinary people, and fairly unintelligible even to the most numerate of taxpayers. That is damaging for our democracy. People should be entitled to understand with clarity how much they are taxed, why they are being taxed and on what they are being taxed. Complexity also increases costs for taxpayers: it is costly for them to get the professional advice that they need to complete their tax returns and the paperwork needed to ensure that they are paying the correct amount of tax. The taxpayer suffers a double hit, because the public purse is put under pressure by the need to employ more civil servants and bureaucrats to tackle the complexity of the system.
Ministers will no doubt say that detail and the dense text of our tax law is needed to give certainty. In fact, complexity can lead to less certainty as people find it increasingly difficult to understand the tax system. That is made worse by the Government's refusal to accept any form of pre-authorisation scheme, as urged on them by the Opposition. Furthermore, complexity can produce more opportunities for aggressive and artificial avoidance mechanisms. The more complex the system, the more places there are to hide. That leads to more complex anti-avoidance provisions, producing a vicious circle of complexity.
A complex, opaque and uncertain tax system deters foreign investment and drives jobs offshore in a globalised economy. A simplified, rational, coherent tax system is a magnet for jobs and employment, so our competitiveness is under threat from a tax system that is overly complex. Lastly, tax simplification will enhance our democracy.
I agree wholeheartedly with the hon. Lady's desire for greater scrutiny, understanding and public debate about tax matters. I commend to her membership of the Standing Committee that considered
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the Finance Bill. All members of the Committee and people in the Public Gallery had the opportunity to understand and scrutinise in a transparent way tax policy decision-making, which was most illuminating. The hon. Lady said in answer to my hon. Friend the Member for Wirral, West (Stephen Hesford) that it was impossible to distinguish clearly between technical aspects of tax policy discussion or cleaning up, and policy decisions. Given her point about democracy, does she accept that because of that ambiguity, if we were to accept the proposal for a commission, it would mean that scrutiny of policy decisions would move from the House to the commission?
Mrs. Villiers: No, I do not accept that at all. I repeat my response to the other intervention on the matter: the House remains sovereign on tax matters. Whether there is a tax commission or not, we are the sovereign body. We can accept the commission's advice or reject it. I believe that simplification will enhance democracy because it will make our scrutiny process much easier and much more effective.
In a recent paper for the Centre for Policy Studies, the distinguished tax lawyer David Martin described our tax law as "obscure and ramshackle". The Institute of Chartered Accountants described our tax system as "spiralling out of control". The complexity of the system is making it increasingly difficult to ensure effective, democratic scrutiny. As I said, every citizen is entitled to understand why they are being taxed, on what they are being taxed and how that tax is calculated. Our amendment will bring a little closer the day when that is true. That is why I commend it to the House.
Stephen Williams (Bristol, West) (LD): I had not intended to speak, but I shall contribute briefly to the debate. Among the Members present, I probably have the unique experience, having spent the past 15 years in the profession, of seeing Finance Bills from the other side of the fence, and for the past month or so of seeing how the Finance Bill is put into practice as a legislator.
With every Finance Bill that is published, various institutes have to publish commentaries. My own institute, the Chartered Institute of Taxation, will shortly send, with a large thud through my letterbox at home, a commentary on the present Finance Bill when it is enacted. The Treasury publishes its explanatory notes, and we all miss the presence of the hon. Member for Wolverhampton, South-West (Rob Marris) to point out aspects of the notes to us. Many other bodies and individuals will offer expert commentaries on the Bill.
Earlier speakers referred to the remit of the tax law rewrite committee that has been established for some time. As I understand it, the committee's original remit was to render into plain English the existing body of tax law. If the committee came across inconsistencies in the English while it was doing that, it would point them out, but its remit was not to rewrite the meaning of that tax law.
From what the hon. Member for Normanton (Ed Balls) was suggesting, this proposal is quite different. In no way does it conflict with the work of the tax law rewrite committee. There is a need for some standing commission to examine tax law as it accumulates with every Finance Billthis year there
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have been three, in totalto make sure that the legislation that we have in place works for a modern 21st century economy.
Mr. Pat McFadden (Wolverhampton, South-East) (Lab): In the absence of my hon. Friend the Member for Wolverhampton, South-West (Rob Marris), perhaps as his neighbour I could take up the baton. There seems to be a parallel discussion taking placeon one side about complexity and on the other side about a commission. The new clause calls for proposals for review, modernisation and improvement, as well as simplification. Surely with such a remit, we would be establishing a system with two masters, which would lead to more complexity, rather than less. What is it about the establishment of a commission that will deal with the parallel discussion about the complexity of a system?
Stephen Williams: I am sure that this House is very jealous of its privileges and would always be the master, as the hon. Gentleman puts it, of tax legislation. We already receive representations from many outside bodies. It has been abundantly clear to me as I have witnessed the Bill's progress through the House, including in Committee, that Treasury Front Benchers, prestigious though they must be in matters of tax law, rely heavily on the Box for their advice. Conservative Front Benchers rely heavily on professional advice, as the hon. Member for Cities of London and Westminster (Mr. Field) acknowledged. I felt sorry for my hon. Friend the Member for Eastleigh (Chris Huhne), because the hon. Member for Cities of London and Westminster read out the briefings so well that my hon. Friend had little left to say. We should recognise that we already rely on many people from outside who contribute to the formulation of our tax law. As politicians, we are all generalists and amateurs, and we need as much help and clarification as we can get from outside bodies and experts to improve the quality of legislation on the statute book.
John Healey: We have had a good debate on the new clause. I particularly welcome the contributions by my hon. Friends who served on the Standing Committee and have come back for more this afternoon.
The hon. Member for Cities of London and Westminster (Mr. Field) introduced his new clause with such a wide-ranging speech that I thought that we had suddenly moved on to the Third Reading debate. He sparked an interesting succession of points about the role of the second Chamber, if any, in finance legislation. He said that that chamber has extensive experience; it does indeed, and it is based on extensive interests. However, I utterly reject the proposition that a non-elected chamber should have a role in any tax matters, tax scrutiny or tax policy decisions. That would overturn a centuries-old principle of this House. The hon. Member for Cities of London and Westminster should be aware, in making sometimes fairly light comments, that the financial privilege of the Commons dates back to the 17th century.
The Minister may be aware that as new clause 4 makes no mention of the other House having
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any overview of tax legislation, this is a tremendous red herring. Only the extraordinary forbearance of Madam Deputy Speaker has allowed us to trespass so far off the beaten track. I hope that he agrees that a tax law commission has nothing to do with the powers of the House of Lords.
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