The Tax System (Hansard, 9 March 1994)

§ The Parliamentary Under-Secretary of State, Department of Employment (Lord Henley)
My Lords, the complexity of the tax system reflects the underlying complexity of the modern world. Nevertheless, the Government remain committed to making the system simpler and more understandable wherever possible.

§ Lord Ezra
My Lords, is the noble Lord aware that the present Finance Bill is probably longer and more complex than any of its predecessors and that both business organisations and the accountancy profession have complained about its complexity and frequent obscurities? In those circumstances, how can ordinary taxpayers—for example, represented by your Lordships —be expected to understand how they are likely to be affected by the Bill? Will the noble Lord explain how the Government reconcile their avowed intention of removing burdens from industry and making life easier for citizens, if they make the tax system ever more obscure?

§ Lord Henley
My Lords, I accept that the present Finance Bill is a fairly bulky document, or rather I should say two bulky documents. However, it introduces fairly major reforms, for example, self-assessment, which will obviously be a complex task 1427 requiring fairly lengthy legislation, which takes up 75 of the approximately 400 pages. It also introduces two new taxes, the details of which take up a further 50 or so pages. There are a further 40 pages on anti-avoidance and revenue protection, which we estimate should bring in another £2 billion over the next two years.
Much of the Bill was subject as well to extensive consultation with experts and representative bodies from all appropriate fields. Over one-third of the clauses were made available in draft. Further, we issued Notes on Clauses for the first time, which we believe will help with the understanding of the Bill. As regards deregulation and the burdens on business, the Budget itself introduced further deregulatory measures. But obviously we believe that there should be on-going consideration as to the burden of tax legislation on business, and that will continue as part of the Government's deregulation approach.

§ Lord Peyton of Yeovil
My Lords, does my noble friend understand how agreeably surprised we all were to hear that the Government have established the target of making tax law simpler and easier to understand? Does he agree that they have a terribly long and painful journey to travel?

§ Lord Henley
My Lords, I think I could agree with my noble friend that it is what might be termed a Sisyphean task. Regrettably, taxation is a regrettable feature of modern life. Governments have to raise money to fund the various services that modern societies demand; and, regrettably, any tax system that is to be fair, equitable and efficient will of necessity be complex. But, as I believe I made clear to my noble friend, we will strive to make the system as efficient and simple as we possibly can, while also accepting that it must be both fair and equitable.

§ Lord Barnett
My Lords, I declare an interest as one who over the years, probably more than most, has introduced complex finance Bills. The Minister said that the Government's intention is to simplify the tax system. Is that why they have introduced this 417-page Bill—to simplify the tax system? Does the Minister agree that much more important than simplifying the tax system is to make it more fair? Given what the Chancellor said last week about the excessively high salaries that are paid to some, will he further agree that, while it is not necessarily too complex a system (inevitably it is complex), it is unfair between the very highest paid and the very lowest paid in the community?

§ Lord Henley
My Lords, that has nothing to do with the Question. But I believe that the system is totally and utterly fair; rich people pay proportionately more in taxes, as is quite rig-it. They pay more than they ever did under governments of which the noble Lord was a member. As regards efficiency and simplicity, I said that we are committed to making the system as simple as possible. One of the changes introduced in what I said was, regrettably, a very long Bill was a degree of self-assessment. That matter takes up a very large amount of the Bill; obviously to bring in some form of self-assessment is fairly complicated in drafting terms.

§ Lord Peston
My Lords, I am a little taken aback that the noble Lord believes that the tax system is progressive. As I understand it, the system is regressive at the bottom end and at best proportionate from then on. Perhaps he can enlighten us on that matter. The Question on the Order Paper is about complexity and simplicity. Will the noble Lord consider that perhaps we ought to do things the other way round; namely, that if a tax cannot be introduced that can be understood by the taxpayer, it should simply not be introduced? Is it not an alarming state of affairs, especially in a democracy, that, as I would guess, virtually none of us in this House can get from where we started (our gross income) down to the tax that we end up paying? It seems to me that that is not a good state of affairs. I spend quite a hit of time trying to do it. I always get near, but I never get to the precise number that the Inland Revenue wants.

§ Lord Henley
My Lords, again, the noble Lord's opening remarks were nothing to do with the Question. But I repeat our belief that the tax system is fair. As regards simplicity, one can have a degree of simplicity; and we will bring in as much simplicity as is possible. But I think the noble Lord will have to accept that if you want to raise taxes in the complex modern society in which we live, of necessity those taxes will be fairly complex and difficult to understand. But we will try to make them as simple as is possible, while maintaining that they should be fair, equitable and efficient.

§ Lord Simon of Glaisdale
My Lords, could not the fiscal code be greatly simplified if, instead of the very complicated provisions against individual sorts of tax avoidance, we adopted the American and Australian general rule that any transaction the dominant purpose of which is tax avoidance should be invalid for that purpose but valid for any other purpose?

§ Lord Henley
My Lords, from his great experience the noble and learned Lord makes a very interesting suggestion, upon which I should not like to comment in detail at the Dispatch Box at this moment. I shall certainly pass on to my right honourable friend the Chancellor the suggestion that the noble and learned Lord made.

§ Lord Avebury
My Lords, if the noble Lord agrees that the tax system has become more complex, does he not think it unfair that individual taxpayers now have to submit their returns in a shorter time and that larger penalties are imposed upon them for lateness?

§ Lord Henley
My Lords, I said that the system had necessarily become more complex, just as society has become more complex, but that we are committed to making it as simple as we possibly can. That is why self-assessment was brought in as one of the simplifications in this year's Finance Bill.

Noble Lords
Next question !

§ Lord Wakeham
My Lords, I think we ought to move on.