Tax Complexity (Hansard, 20 November 2000)

§ Lord McIntosh of Haringey
My Lords, as with other representations he receives on tax, the Chancellor of the Exchequer will give due consideration to those proposals in making his Budget decisions.

§ Baroness Noakes
My Lords, I am grateful to the noble Lord for that reply. I should declare an interest as a council member of the Institute of Chartered Accountants.
Does the Minister agree, to select one of the institute's 10 tenets for a better tax system, that the tax rules should be simple, understandable and clear in their objectives? Does he agree also that, with Finance Acts of 600-plus pages as we had this year, the current tax system is far from simple, understandable and clear?
The Government introduced a system of setting out their main objectives, aims and targets in public service agreements and service delivery agreements covering what they are trying to achieve. Will the Minister please explain why no mention of achieving simplicity, understandability or clarity in the tax system can be found anywhere in those agreements for either the Treasury or the Inland Revenue? Does this mean that the Government are not in any sense committed to simplification?

§ Lord McIntosh of Haringey
My Lords, I agree with several of the 10 tax tenets set out in the appendix to the ICA report. It is an interesting, worthwhile and constructive report. However, the length of a Finance Bill is not necessarily an indicator of whether or not it is a good Bill. The first project of the tax law review body chaired by the noble and learned Lord, Lord Howe of Aberavon, is the draft capital allowances Bill, which is substantially longer than the legislation it replaces. But that is not necessarily a bad thing if it is also much clearer.

§ Lord Goodhart
My Lords, as a member of the tax law review committee, can I ask the Minister whether he agrees that, although sheer length may not be a test, what we have had in the past three Budgets and seem likely to get in the next is a great many pages taken up with little bits and pieces with no specific theme behind them? Does he agree that items such as little reliefs for, let us say, venture capital tend to be largely useless and clutter up the statute book appallingly?

§ Lord McIntosh of Haringey
My Lords, I cannot accept any assumptions which the noble Lord, Lord Goodhart, may make about the next Budget. But it is true that there has to be a trade-off. If we are responsive to those who point out defects in the tax system and try to deal with such defects quickly, inevitably some of that will add to the existing tax structure without a fundamental reform. We have to make a choice as to whether it is important to be responsive to legitimate pressure, or whether we say that we cannot do anything because we have a longer-term project to simplify taxes. There is no ideal solution to this problem.

§ Lord Saatchi
My Lords, does the Minister agree that one of the main recommendations that the institute makes in its report is that this second Chamber could perhaps play more of a role in the scrutiny of financial legislation? Will he therefore consent to join myself and other interested Peers in an attempt to see if we can obtain cross-party consensus to examine ways in which the procedures of your Lordships' House can be modernised in the area of tax and other Treasury affairs?

§ Lord McIntosh of Haringey
My Lords, I welcome the return of the noble Lord, Lord Saatchi, to a theme which he has pursued quite legitimately for a considerable period of time. He will understand that, whatever I might say as a citizen, it is not easy for me to respond when I speak on behalf of the Treasury in this House. It would be difficult therefore for me to join a group of the kind he suggests.
However, perhaps I may say that I feel I was somewhat abrupt in my response to the noble Lord when he raised the issue of simpler tax structures in the debate on the Pre-Budget Report. I was over-simplistic in my replies. The noble Lord deserves a fuller response at some stage, which I hope I shall have an opportunity to give him.

§ Lord Barnett
My Lords, as someone who has put much complex tax legislation on the statute book, I declare an interest. Can my noble friend tell the noble Lord, Lord Saatchi, that, while a number of us may be interested in joining such an all-party committee, the plain fact is that most tax legislation, under any government, will be complex? It would be foolish to pretend, as the noble and learned Lord, Lord Howe of Aberavon, pointed out in his excellent report, that tax legislation is other than complex and, therefore, by its nature, difficult for any committee, however good—even one chaired by the noble Lord, Lord Saatchi—to simplify.

§ Lord McIntosh of Haringey
My Lords, I share with my noble friend Lord Barnett admiration for the noble and learned Lord, Lord Howe, and his chairmanship of the steering committee of the tax law re-write project. The project goes back over tax laws for a period of 200 years. Inevitably there will be an accretion and matters to be put right. It rather reminds me of the bursar of an Oxford college who rejected the college's investment policy on the grounds that the past 200 years had been wholly exceptional.

§ Lord Northbrook
My Lords, will the Minister admit that under the current Government capital gains tax was made much more complicated by the introduction of the taper relief? If he will not admit that, will he explain how it has become simpler?

§ Lord McIntosh of Haringey
My Lords, the taper relief replaced the previous relief, which was not called "taper". There was no addition in complexity. There was a short-term addition in complexity when the two forms of relief operated concurrently, but that time passed quickly.

§ Lord Haskel
My Lords, will my noble friend agree that one of the reasons why tax legislation is so complicated is the huge tax avoidance industry operated by many members of the accountancy profession who continuously call for tax simplification?

§ Lord McIntosh of Haringey
My Lords, tax experts, both accountants and lawyers, are paid substantially more than those in the Inland Revenue and the Treasury who have to counter their attempts to minimise the tax burden of business and individuals. It is in taxpayers' interests that we should continue effectively to counter them.

§ Baroness O'Cathain
My Lords, does the Minister agree that one of the major benefits of having a complex tax system is that it is easier for any government to introduce stealth taxes?

§ Lord McIntosh of Haringey
My Lords, no, I am not a supporter of stealth taxes, and I shall not be trapped into the suggestion that I am.