Summary
The prospect of a more predictable, stable and simplistic tax policy system proposed by the Government would be beneficial but should be outlined fairly.
In the report 'Principles of Tax Policy’ (HC 753), the Committee attempts to identify underlying values for tax policy and considers how they could best support growth as the Government has not done enough to clarify this.
A tax system which is theoretically structured to promote growth will not succeed if businesses are faced with constant change, or if the inefficiency of collection outweighs any benefits.
The report warns that a tax system which is felt to be fundamentally unfair will quickly lose political support. It also notes that the scope for tax arbitrage has grown substantially over the last quarter of a century and globalisation is likely to increase it further.
A tax system which is not competitive by international standards will not support growth. Competitiveness is also not a simple matter of tax rates, although they have a bearing, but of the stability of the system as a whole.
The report recommends that tax policy should:
- be fair;
- provide certainty;
- support growth and encourage competition;
- provide stability;
- be practicable, so that a person's tax liability should be straightforward and cheap to collect; and
- be coherent - new provisions should complement the existing tax system, not conflict with it.
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