5 Scrutiny of tax
76. Tax policy and legislation could be and should
be better scrutinised. This is not something that Parliament can
do alone; the Government and tax profession must also play a part.
77. As we have already noted, the previous administration
introduced reforms to give more time for consultation on tax changes.
Where possible, it published draft clauses in advance of tax legislation.
This was welcome. The current Government has taken further steps
to extend the time between policy formulation and enactment to
allow time for better consultation before legislation is drafted
and a further opportunity before it is enacted.
78. The proposal is that there will be:
- A Spring Budget in which policy proposals are
announced for consultation
- Draft Finance Bill clauses, published for comment
in late summer.
- Finance Bill published in the autumn
- Finance Act published around the end of the calendar
year to take effect from the following April.
79. This will also mean that the Finance Act is in
place well ahead of the tax year it will first affect. Even though
2010 was a transitional year, we have seen already more time being
built into the budgetary timetable, in which a short post election
Finance Bill in June was complemented by a further Bill in the
autumn, which had been preceded by the publication of draft clauses
in July. The Finance Bill 2011, is following the same pattern:
draft clauses were published for comment on 9 December 2010 and
we already know the Bill itself is due to be published on 31 March
2011. We have already welcomed this more deliberate approach to
tax policy making.
80. Last year, the Exchequer Secretary invited the
Committee to consider the Government's proposals for improving
tax policy. In his reply to that invitation, the Chairman of the
Committee emphasised the importance of Committee engagement:
As some of the reaction to HMRC's consultation on
PAYE reform has shown, even technical matters relating to tax
policy and administration can involve highly political questions
about the individual's relationship to the state and the allocation
of resources. It is therefore crucial that elected representatives
in the House of Commons are fully engaged with the policy-making
process. Any move that could compromise, or could be perceived
to compromise, the primacy of the Commons in this area would be
unacceptable. The IFS discussion paper argued that there is scope
for improved scrutiny of tax policy through the select committee
system. In particular it suggested that select committees could
undertake pre-legislative scrutiny of such proposals.
We agree with the discussion paper on this point,
and this Committee intends to take a more active role in this
respect in the future. We will seek to report on draft proposals,
when appropriate, in time to inform the final legislation. However,
that will only be possible where there is a clear and consistent
timetable for consultation, which takes account of parliamentary
sitting patterns and gives committees time to consult external
experts.[54]
81. However, although this Committee has an important
role in scrutinising Government proposals, it is not equipped
for a comprehensive role in the legislative process, nor are there
precedents for a departmental select committee playing such a
regular role.[55] Some
might argue that we should take on the task, as happens in other
countries, but that would represent a transformation of Parliamentary
practice. Improvements to the current scrutiny arrangements of
the Finance Bill should be the first step. Our response to the
Exchequer Secretary also emphasised the importance of ensuring
that debate on the Finance Bill was properly structured and given
adequate time. There may be an occasional need to limit debate
on the Finance Bill to make arrangements before a forthcoming
election. We would be dismayed if, in other circumstances, there
was no opportunity to debate individual provisions. However, those
outside the House need to recognise that on occasion, a provision
may not be debated simply because there is general agreement that
it is satisfactory.
82. Since we
recognise that tax law can be a complex and technical subject,
we have invited the tax professional bodies to brief us on the
Government's proposed tax changes, so that we are in a position
to comment at the time of the Budget. This will, we hope, assist
colleagues in their consideration of the Finance Bill. We continue
to believe that the Government should examine how consideration
of the Finance Bill can be structured in order to facilitate engagement
between experts and Members, and allow Members the time to debate
both technical and politically controversial matters in Committee.
83. Others have argued for more resources to be made
available. In The Political Economy of Tax Policy, published
ahead of the Mirrlees Review, James Alt, Ian Preston, and Luke
Sibieta consider that
in order to undertake effective pre-legislative scrutiny,
MPs require more resources. At present, much advice and support
comes through external organizations, and this could be extended.
However, another possibility is a formal in-house service akin
to the Congressional Budget Office in the US, which could be explicitly
charged with providing analysis of tax policy for MPs.[56]
We are attracted by the concept
of a specialised unit to provide MPs with technical support and
analysis of tax policy. We recognise that in a time of stringency,
this may only be achievable by diverting resources from other
research centres; but there is a case for ensuring that MPs are
better briefed on tax matters by Parliament. We will return to
this issue.
54 http://www.parliament.uk/documents/commons-committees/treasury/DavidGaukeletter.pdf Back
55
The role of the select committee in the quinquennial Armed Forces
Bill is not directly comparable. Back
56
IFS, The Political Economy of Tax Policy, Chapter 13 Back
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