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CBI complains of lack of consultation on tax changes

The Confederation of British Industry (CBI) has called for consultation and vision in tax policy making by the UK government.08 Sep 2015

In a paper addressed to the government, the CBI said that it is time to review the full range of taxes facing business. The government has pledged to publish a business tax roadmap by April 2016, and the CBI asked it to ensure that this is "as comprehensive as possible, covering the full range of taxes affecting businesses and recognising the value businesses attach to predictability".

"Setting out a vision and sticking to it is often more powerful than an unexpected tax giveaway," the CBI said.

Business needs stability and the ability to plan tax bills, said tax expert Heather Self of Pinsent Masons, the law firm behind Out-Law.com.

"For businesses making long-term investment decisions, stability and confidence in the tax system are vital. For example, if a business is submitting a fixed price bid to build a new road or hospital, it needs to be able to predict the tax it will pay on the project. The government needs to build on the good start it made in the last Parliament, with the corporate tax roadmap," she said.

"The sheer volume of tax legislation is becoming overwhelming, and there are over 30 consultative documents out for discussion this summer. Business needs a period of stability, with the government resisting the temptation to bring in hundreds of pages of new legislation every year," Self said.

The CBI said: "The unanticipated time pressure placed on the finance bill reading towards the end of the first fixed term parliament and the lack of consultation on some of the measures introduced in the Summer Budget 2015 should be reflected on. In addition we’d like to see a recommitment to the 2010 principles, with the good intentions offered within that document delivered in practice."

Changes to the pensions tax regime in particular, have been a problem, it said.

"Nowhere is certainty more important than in making the long-term decisions required for saving into a pension … Not least because the cost of an ageing society ill-prepared for retirement will eventually fall back onto the tax payer," it said.

During the 2010-2015 Parliament, "at nearly every budget the chancellor reduced the rates of pensions tax relief for private pensions. Meanwhile, the government is consulting on even more far-reaching changes to the system. Every time there is a change to the rates of relief, trust in the system and willingness to save into a pension is reassessed," the CBI said.

Pensions expert Helen Hanbidge, also of Pinsent Masons, said: "I doubt many in the pensions industry would disagree with this pithy summary of the problems caused by never-ending pensions tax reforms. As individuals shoulder more of the burden of pension saving, the government should do everything it can to promote a stable and uncomplicated tax framework."

In a letter accompanying the paper, the CBI criticised recent changes to the tax system.

"A restriction on corporate tax relief for the cost of goodwill, introduced in the summer budget, sent a confused message to multinationals looking to move business activity to the UK", while a change to tax rules for multinationals with offshore finance operations undermined a regime that was working well, the CBI said.

“We were disappointed that neither of these measures received consultation, nor was the rationale for change adequately explained. We believe this was a missed opportunity in the policy making process given the government is keen to promote the UK as having a competitive yet fair tax system," the CBI said.

The CBI called for more time to be built into the tax policymaking process, "allowing better and more meaningful consultation, as well as greater scrutiny. Having two fiscal events a year does little to contribute to a predictable, stable or simple tax system so we are calling on the government to recommit to its 2010 tax policy making principles to develop tax policy over a longer period of time. We’d also like to see a post-implementation review to ensure tax policies are meeting their original objectives".