MPs issue principles for judging future tax policies

The Treasury select committee has issued a raft of measures against which it will judge future tax policies against.

In a report released this morning, the committee lays out six principles including coherency, stability and certainty, aimed at improving the tax making policy process.

TSC chairman Andrew Tyrie says: “Our aim as a cross-party committee, has been to produce a number of tax policy principles on common ground which are accepted across the house. We intend to consider the measures contained in future budgets against these principles.”

The first is fairness. The committee says if the tax system is considered fundamentally unfair it will fail to command consent. The report notes the fact there is little agreement on what constitutes a fair tax.

Second is support growth and encourage competition. The report warns certain tax structures can mean businesses divert time and effort to avoid taxes.

Third is provide certainty so individuals do not have to resort to courts to resolve how the rules apply to them. The report adds delivering this clarity requires simplicity, targeting and legal clarity.

Fourth is provide stability. Changes to policy should be kept to a minimum with economic or social justification given for any proposed changes.

Fifth is that the system be practicable so a person’s liability is easy to calculate and straightforward and cheap to collect.

And sixth, the system should be coherent with new provisions complimenting the existing system not conflicting with it.

Tyrie adds: “The coherence of the system affects the basic principles of both fairness and growth. A system riddled with anomalies will not be considered fair and will impact economic performance. and make the procedural principles of certainty, stability and practicability harder to achieve.”

The report is the result of an inquiry which took in written evidence from nearly 50 organisations and oral evidence from the Institute for Fiscal studies, PricewaterhouseCoopers and others.

The Budget is on March 23.