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MPs disappointed as govt rejects tax strategy proposal

MPs disappointed as govt rejects tax strategy proposal

The Treasury Committee has stated its disappointment with the government’s response to its Tax After Coronavirus report published earlier this year, in particular its refusal to issue a tax strategy.

On March 1, 2021, the committee published a report in which it outlined a series of long-term tax reform recommendations that it said would be needed in the future.

The MPs called for widespread reform of stamp duty, pensions tax relief and the "inconsistent" treatment of those with different employment statuses by the tax system.

They also made a recommendation that the government draw up a draft tax strategy for consultation, in which it should set out what it wants to achieve from the tax system.

However, the government dismissed the recommendation. 

The committee has now urged the government to provide a more detailed explanation of why it has rejected it.

MP Mel Stride said: “Our inquiry was a thorough look at the tax system and an appraisal of how it could be reformed to raise money and improve the economic efficiency of the tax system.

“Whilst the committee does appreciate the difficulty in pre-announcing tax policy, it is disappointing that the government has rejected our recommendations to improve the approach to tax strategy, when the evidence was overwhelmingly in favour.”

The committee had proposed that the strategy should include the role of the tax system in meeting fiscal goals; securing a neutral tax system which treats similar activities in similar ways, including fair taxation of different structures of work; ensuring that taxation is progressive and fair to future generations, meeting climate change goals for net zero; ensuring growth of business and employment and including a new business tax roadmap to provide investment certainty for business; and a five to ten-year strategy for corporation tax rates.

It also said principles should include reducing the tax gap, indirect taxes such as VAT which were previously covered by EU law which no longer applies, and reducing compliance costs, especially through appropriate tax simplification. 

The report said: “This should include a framework within which new reliefs can be assessed or existing ones withdrawn. 

“The government should ensure that the principles balance revenue raising, economic growth and other objectives, such as improving the quality of the environment and 'levelling up'.”

However, in the government’s response it said it was “already using that freedom” to create a fairer and more robust tax system, which complied with World Trade Organisation rules and other international obligations. 

It said it had introduced changes effective from the end of the transition period in respect of goods from overseas suppliers, alongside many other changes that took effect this year. 

It said: “As announced at Budget 2020, the government is also currently undertaking a review of alcohol duty, a review of the UK funds regime including the VAT treatment of fund management fees, and establishing an industry working group to review how financial services are treated for VAT purposes.