A code of conduct for taxation

Issued jointly by the Association for Accountancy and Business Affairs (we'd never heard of them either) and the Tax Justice Network, this document is intended to encourage a broader debate over taxation. Whilst issued by UK based persons, the code is designed to apply internationally. The code itself is only two pages but, when read in isolation, suffers from its own simplicity. The code with accompanying commentary is much longer but merits at least a skim read. Tax code & commentary October 2007

Much of the commentary is unobjectionable, most readers will find something over which to be informed and there are isolated aspects which are worthy of consideration in a narrower context. Moreover, as with all documents of this nature, some of the ideas will find their way into other thinking and this will help improve the quality of debate which can be no bad thing. The author, who is not a lawyer, makes a hash of some of the legal commentary, using purposive construction and equitable construction as though they were interchangeable, but this does not detract from the core message.

The code is, however, flawed because it is founded on the notion that a purposive tax code (together with a general anti-avoidance provision) must be adopted in order the objectives are achievable. This may, indeed, be sound thinking, in principle, but, in practice, if the UK ever comes to have a purposive tax code, it is unlikely to be in the lifetime of anyone reading this. This could well be because the UK government simply cannot "do" purposive tax law without making a complete meal of it (the recent TAAR on capital gains being an example). It could be because a re-write of the longest tax code in the world would be like running in the very finest of sand for even the most skilled of draftsmen. But, in reality, we would venture that it is because the enactment of a purposive code, whether in tax or any other area of the law, does, by its very nature, shift power from the legislature to the judiciary and there is no way that a modern UK executive is going to countenance giving more influence to the judiciary. A competent politician would not be concerned with this, but since when did we have a decent quota of those ?

Which leads to the major criticisms of the report, in terms of content, rather than its aims.

Firstly, where is any worthwhile discussion or comment on the role of modern government itself and especially what the UK government has contributed to the current state of the UK law. There is more than a passing dig at the tax profession and taxpayers, and this is not wholly undeserved, but the fact remains that it is governments who make the laws; the rest of us have the task of making do with whatever we are given to work with.

Anyone who has spent the past ten, or more, years engaged in tax practice will attest that bad politicians make bad law and bad law spawns yet more bad law. If you create the gaping wound in the first place, it's not much good putting sticking plaster upon sticking plaster over the wound whilst blaming the victim for still bleeding. Everyone will have their view over when it all started going wrong; our own is the removal, in 1985, of the upper limit on employer's NIC which was unsound in its philosophy and left employers, freed of the moral obligation which would have come with paying a tax, to encourage the growth of the early gold bullion and fine wine avoidance schemes and, with it, the tax product flogging of the modern era.

In only the past fortnight, we have had a pathetic display of empty-shirt politicians from both main parties pandering to the electorate with ill thought out policy, which has done no one any favours. The announcement of proposed law changes seemingly on a whim, and for politically expediency, fails to observe the most basic principles of sound law making. The proposal to simplify capital gains tax has upset just about everyone and it will, if enacted in its current form and without proper consultation, be sure to lead to many future amendments, thereby simplifying nothing but merely adding to the quantity and complexity of the legislation. The proposals for the changes to the taxation of non domicilaries have been made without there even being a consensus over the figures involved and, whilst the politicians continue to argue over these, all the ensuing uncertainty achieves is for the figure of the extra tax take to go down as the government's "target market" seek to address the uncertainty themselves, by looking towards more stable regimes elsewhere.

Secondly, and not wholly unconnected with the first area of complaint, is the need to examine why the law generally is no longer respected in the way it once was. In an era of self interest and an increasingly fragmented society, there can be no doubt that individuals have lost their respect for the law generally and this should be addressed as part of any consideration of what needs to be changed. The blame for this does, we feel, rest mainly with the politicians who are too ready to curry immediate favour and to display a lack of respect for the law in so doing. Intricate tax laws, such as the remittance basis for non domiciliaries, may be too abstract for many laypersons to relate to in any event, but a far more accessible example can be found in another area of recent political points scoring. At this year's Labour Party conference, we had a minister (and not just any minister, but the Secretary of State for Justice, and a Queen's Counsel, no less) spew forth on the inadequacies of the criminal law in protecting those who act in self defence; but yet, away from the immediate headlines, when the government was pushed over what would be changed, the admission was nothing would be changed because the relevant law was already perfectly adequate. The result, one low grade politician with some cheap short term political capital, and many ill informed citizens with a long term misunderstanding, and a reduced respect, for the law.

There is no suggestion that politicians should be expert in the fields in which they make laws, but they should be expected to attain an acceptable level of competence in the manner in which they formulate and enact all laws. Whether modern governments meet that standard, and the consequences which ensue when they fall short, is, perhaps, the real issue, and not just in tax law but across all of the law.