Another internal LNUK blog.
Today, according to the BBC, the Chancellor George Osborne (for some reason the BBC only uses a lower case c for Chancellor, something I decline to follow) has announced that he is setting up an "Office for Tax Simplification" (OTS).
One has some sympathy for the members of this new office, whom so far include amongst their number former Conservative MP and Treasury minister Michael Jack, as Chairman, and John Whiting, formerly of PricewaterhouseCoopers, who is tax director at the Chartered Institute of Taxation, as Director. Each has just been despatched to legislative drafting's equivalent of the Eastern front but, honourably, "neither will be paid".
We have been here before, of course. The Finance Bill of 1986 prompted much grumblings from solicitors and accountants due to its complexity. A decade later, with characteristically bland understatement, the Inland Revenue reported that the language of the existing law "could be simplified". The then Chancellor, Ken Clarke MP, had a go at this with a rewriting project. It began umpromisingly with Mr Clarke offering that the project was as ambitious as "translating War and Peace into lucid Swahili. He then admitted that that too was an understatement, since War and Peace was a quarter the length of the tax law as it then stood (1,500 pages for the Russian novel versus 6,000 pages for UK tax lawyers) and "hadn't been written by a Tolstoy". Former finance draftsman Francis Bennion later observed: "He might have added that neither is War and Peace a palimpsest of a thousand disconnected fragments from different years ..."
By 2001, following a change of government, the project had managed to come up with the Capital Allowances Bill, which weighed in at a mere 903 pages for just one area of tax law. Mr Jack was still an MP at the time and told the House he was pleased with the effort, though Mr John Redwood MP couldn't resist asking whether he thought Ken Clarke would have been happy with the outcome in the light of his introductory remarks in 1996.
On the reformers pressed and six years later we had the Income Tax Act 2007. One objective of this was to consolidate existing legislation and hence make it easier to find, though it was also hoped that it would be "easier to understand" - which is not the same thing. The Act amounted to almost 1,000 sections and in a depressing act of symmetry in the subsequent three years almost 1,000 amendments have been passed, leaving little of the original wording intact. I wonder if anyone's found anything easier as a result.
Ken Clarke, long thought politically extinct, is of course now back with us as Justice Minister, and so it would be a useful time to ask him Mr Redwood's question again. Given that we have gone from 6,000 pages in 1996 to 11,000 in 2010 we can probably assume he wouldn't have been happy in 1996 and isn't now. He along with the rest of us will be wishing Mr Osborne's simplifying office all the best in their endeavours, but unless the fundamental reason behind tax complexity is addressed their task is impossible, and will have the same outcome as all the other reforming efforts already mentioned.
That fundamental reason was expressed in one sentence by Mr Bennion in the article quoted above: "It is policy that produces complexity". The UK government has always used the tax system and always will not simply as a means to raise revenue but to try and engineer what it considers socially desirable outcomes. Hence in capital allowances it is forever trying to discriminate between different classes of assets. VAT law, too, is absolutely riddled with exemptions dating back to its introduction. All one can say is that they started as they meant to go on. This letter by a former Parliamentary Draftsman tells how the government of the day presented them with an absurd task by wanting an exemption for VAT for "the working man's fish and chips". The results of the effort to provide for such an exemption in a legally satisfying form are still with us today. Much later a similarly absurd complication was unleashed by Parliament when it decided that the other form of chip, that formerly known as crisps, were a bad thing, and therefore had to be exempted from a general exemption. This led to litigation over whether or not the well known Pringles product were actually potato crisps, and accordingly exempted, which in turn depended on whether Pringles were 'similar' to potato crisps 'and made from the potato' (for the record, they were, despite having less actual potato content than other crisps: see Procter & Gamble UK v Revenue and Customs Commrs  EWCA Civ 407,  All ER (D) 177 (May)).
When, therefore, not if, the OTS fails in its task, is it too much to hope that anyone will take heed of the fundamental problem?