Finance Bill Clause 2
Brooks Newmark raises concerns about tax changes that are effectively implemented by ministerial statement and then rubber-stamped by legislation and speaks in favour of a principle of good practice for retrospective taxation legislation.
New Clause 2: Principles of good practice for retrospective taxation legislation
Mr. Brooks Newmark (Braintree) (Con): I wish to speak briefly in support of the principle of good practice for retrospective taxation enshrined in new clause 2. I draw Members' attention to my entry in the Register of Members' Interests.
Debating the principles of retrospective taxation reminds me of the heady days of Standing Committee D considering the National Insurance Contributions Bill. The debate revolved to a large extent around this principle and its boundaries, although, as we found out, the principle was being made up on the hoof and the boundaries were anyone's guess. Fine wines and platinum sponges featured strongly, and they certainly made for hedonistic debate, although since the latter have a more prosaic function in catalytic converters, it is perhaps appropriate that the catalyst for new clause 2 was the introduction of retrospective environmental taxation.
I spoke then about the dangerous precedent of backdating tax changes to coincide with an expressed intention to legislate. We should not be encouraging a state of play whereby tax changes are effectively implemented by ministerial statement and then rubber-stamped by legislation at a later date. Worse still, we should not require sections of the financial services industry routinely to thumb through Hansard to check whether the Paymaster General has said anything threatening-which I know is not her usual practice, but which has occurred from time to time.
I am pleased that subsection (4) addresses specifically the practice of announcing things to Parliament and using them as the peg on which to hang retrospective taxation. It might make for convenient government, but it sends all the wrong signals.
John Bercow: I accept the thrust of my hon. Friend's remarks, but does he agree that notwithstanding the joys of new clause 2, it is of doubtful value to afford to the Government discretion as to the manner of the publication of their future intentions? That leaves open the possibility that lots of people who will be affected will not get to know.
Mr. Newmark: My hon. Friend makes a valid point, and it follows on from the excellent one made earlier about small businesses that do not have on their payroll the sort of people who can do the Government's dirty work for them and identify such problems coming down the track.
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I also welcome the two principles set out in new clause 2(7), which propose that the Government keep their powder dry on retrospective taxation unless it is needed to address a conflict that has arisen with "reasonable expectations", or to guard against a new tax avoidance scheme that would lead to a loss of revenue. The Government should look again at whether it might not be timely, after 22 years of the Ramsay case, to review the distinction between legitimate tax planning and illegitimate tax avoidance.
Without wishing to wander too far from the new clause, I hope that the Government will take this opportunity to reaffirm a commitment to certainty in the tax system. Adam Smith, the second most famous economist to come out of Kirkcaldy, wrote in his "The Wealth of Nations" that
"the tax which each individual is bound to pay ought to be certain and not arbitrary. The time of payment, the manner of payment, and the quantity to be paid ought to be clear and plain to the contributor and to every other person."
That is a fine statement of principle, although it is perhaps a little too well written ever to make it on to the face of a Finance Bill.
It is a pity that none of the events that the Chancellor has sponsored at No. 11 Downing street over the years took its cue from the Adam Smith Institute, but I hope that the Government will see fit to endorse the principle underlying new clause 2.