Last week (18 May 2011), representatives from ICAEW, ICAS and ACCA appeared before the House of Lords Select Committee on Economic Affairs, Finance Bill Sub-Committee to answer questions on (amongst other things) Tax Policy making.

There was a general feeling that things need to improve – there is too much complex legislation being rushed out with poor scrutiny.  Inevitably, that leads to poorly drafted legislation that doesn’t achieve the policy objectives and probably needs amending, a couple or more times.

A lot of the discussion was around improving the scrutiny of policy proposals and draft legislation.  In this context, an interesting suggestion was that the Finance Bill Sub-Committee should have a more active role in formulating and scrutinising Tax Policy and Legislation.  This was not a suggestion that the role of the House of Commons should be in any way reduced but a recognition that there is, in the House of Lords, considerable experience on Tax matters.

Personally, I think that any move which results in better and more detailed scrutiny of draft Tax Legislation has to be a good move.

However, what I did find somewhat worrying was the suggestion from Chas Roy-Chowdhury, head of Tax at ACCA, that responsibility for Tax Policy should move back to HMRC from Treasury.  Whilst I can accept that the Treasury may not be making a great job of it, I don’t accept that the solution is to put it back in the hands of HMRC.  HMRC has enough power as it is, we don’t need them driving Policy as well – OK, I know that, strictly, it is Ministers who decide Policy but in reality that is at a much higher level.

HMRC should be required to focus on the job of implementing Policy and administering the tax system.  Policy should be in the hands of someone else.

Now, as I said above, Treasury are not exactly making a great job of their Tax Policy role but I would prefer to see an effort made to improve their performance, rather than simply giving up and giving the job back to HMRC.  I have had a lot of dealings with various people in the Treasury on Tax Policy issues and by and large they are extremely competent people trying to do a good job.  However, I have two observations: first, a lot of them are extremely young and inexperienced and I suspect this is an early step on a career path.  If we want good Tax Policy then we need to have good, experienced people working on it.  The second point is that they don’t stay around for very long before being moved off into some other role.  It’s difficult to get good detailed experience if you keep moving around.

If these points could be addressed, I believe the Treasury’s performance in this area would rapidly improve.  Indeed, Mr Chowdhury made a point to the Sub-Committee

“HMRC have the tax expertise. The Treasury has the economists, who have not probably ever dealt with tax”

He felt that this was reason to move Policy back to HMRC but what if we were to move some of HMRC’s expertise to the Treasury?  Why shouldn’t some of HMRC’s best people be seconded to the Treasury to work with them on policy issues?  Even easier as they share the same building.

NOTE: I have based this Blog on a reading of the Unrevised Transcript of the meeting (published as such online), which has not been reviewed by the attendees.