ACCA sets out tax manifesto
A ten point charter aimed at delivering fundamental reforms to the UK's tax system was announced today by ACCA (the Association of Chartered Certified Accountants). ACCA is the leading global provider of accountancy training and the UK's foremost adviser to the small business sector.
ACCA's proposed reforms are set out below:
"This manifesto reflects, through the experience of our membership, the key concerns of companies throughout the UK. It provides a timely reminder to all political parties that a simplified tax system works well for business and personal taxpayers. The clear message is that certainty and fairness in tax regulation delivers stability within the economy and the best possible climate for wealth creation and employment growth."
ACCA's proposed reforms are set out below:
- UK needs a Tax Policy Committee
- Tax avoidance - uncertainty is no answer
- European Court of Justice - a new era in tax law
- Have one full budget per Parliament and not one per year
- Self-assessment - give incentives and encourage e-filing
- Competition is good: the tax arena is no different
- Stamp duty - don't penalise mobility
- Inheritance tax - no longer just an issue for the rich
- Be flexible - don't discriminate against different business structures
- 100% Capital Allowances are important - reinstate them!
Tax change should be driven by a Tax Policy Committee (TPC) which would operate along the lines of the Monetary Policy Committee (MPC). Government would set the overall economic framework of the tax environment and the TPC would work on adjusting the tax system as appropriate, with a view to long-term simplification.
Tax legislation should be clear and unequivocal. It is unhelpful for businesses, individuals and tax practitioners to hear the Government use the term "unacceptable tax avoidance". Tax avoidance by definition is legal, tax evasion is illegal. There should be clarity in the Government's position and certainty in the legislation.
The impact of ECJ decisions on UK tax law is of concern. Instead of reacting to ECJ cases on an ad hoc basis, Government should adopt pro-active reform to ensure the tax system is fundamentally compliant with EU law. This approach would help to eliminate uncertainty for business and positively engage the UK in the development of EU tax policies.
Annual budgets add new regulations and undermine the process of strategic business planning. ACCA believes that one budget per Parliament would best serve the interests of corporate and personal taxpayers and enable them to plan for the future. Government already sets long-term spending plans via its Comprehensive Spending Review, and a four yearly budget would complement this process. This would be accompanied by short, focused annual budgetary reviews.
The move to self-assessment across most of the tax system is part of a global trend. But the UK system is largely sanctions-driven. It should be modified to create new incentives for early payment. For example, early filing could be rewarded by the tax inquiry ‘window' being closed sooner. Although internet filing should be encouraged and simplified, it should not be made mandatory.
Corporation Tax rates have broadly halved in the past 20 years due to international competition. It is crucial that the UK remains competitive and an attractive location in which to do business - the success of Ireland's 12.5% corporation tax rate in attracting internationally mobile businesses shows the importance of this. At an EU level, governments should work to remove barriers to trade within the single market that are caused by unequal tax regimes.
With the housing market beginning to cool off and prices sliding, there is no justification for maintaining the current stamp duty system, which penalises people's mobility. There should be an immediate review of the illogical system of thresholds, whereby a £249,000 house purchase deal is subject to 1% tax, while a £250,000 purchase incurs a 3% charge on the whole price. As with Income Tax, the higher rate should only apply on the percentage of the purchase price above the threshold.
Rising property prices have drawn more people than ever into the inheritance tax regime. The Government should respond to this development by extending to inheritance tax a similar exemption to that which currently applies to the individual's main residence under capital gains tax. This simple change would remove one of the greatest inequities of the inheritance tax system and reduce the burden on ordinary taxpayers.
In a dynamic business environment, it can sometimes become inappropriate for a business entity to remain as a company. Given that incorporating can occur without tax cost, it is unfair to levy a tax penalty on companies which decide to pursue a different structure. More flexibility here would help to boost entrepreneurship.
ACCA believes the 100% capital allowances for investment by Small to Medium Sized Enterprises (SMEs) in information and communications technology - abolished on 1 April 2004 - should be reinstated immediately. Capital allowances are the most effective government initiatives for providing grants and investment.
"This manifesto reflects, through the experience of our membership, the key concerns of companies throughout the UK. It provides a timely reminder to all political parties that a simplified tax system works well for business and personal taxpayers. The clear message is that certainty and fairness in tax regulation delivers stability within the economy and the best possible climate for wealth creation and employment growth."