Examination of Witnesses (Questions 121
WEDNESDAY 13 MARCH 2002
121. Mr Whiting, can I welcome you and your
colleague to the Committee. For the sake of the shorthand writer,
could you formally identify yourself and give your exact title?
(Mr Whiting) Thank you. I would be pleased
to do so. I have the honour to be President of the Chartered Institute
of Taxation. I am also a partner in PricewaterhouseCoopers, based
(Ms Self) I am the Deputy President of the Chartered
Institute of Taxation, and a former member of the Self Assessment
Consultative Committee on Corporation Tax. I am also the group
tax director of Scottish Power plc.
122. Thank you very much, and thank you for
the memorandum you submitted. In that memorandum, you tell us
that "it is inevitable that self-assessment puts greater
burdens on taxpayers and advisers than was the case with the old
system". Given that the Revenue calculate the tax due on
the returns received by 30 September, can you explain briefly
why you think that is true?
(Mr Whiting) Yes. In terms of income tax, inevitably
there is more for the taxpayer or their agent to do in gathering
information, collating it into the right form, and submitting
it on the forms. Certainly, if the return can be submitted by
30 September, then the Inland Revenue will, of course, aim to
calculate the tax in time, but being realistic, this is not always
possible, therefore the taxpayer or agent has to calculate the
tax bill. There is also a good deal more management of paymentsmonitoring
of payments and repaymentsthat is thrown on to the taxpayer
and the agent. Now, I do not think we would necessarily say that
is of itself bad because we all have our civic duty to do in complying
with tax affairs but, as much as anything, we just seek to acknowledge
that there has been a shifting of the burden towards the taxpayer
123. You also say that the revenue and the Government
have a duty to make sure that the burdens of the tax system do
bear as lightly as possible on taxpayers and employers and advisers.
Do you think they are meeting that duty?
(Mr Whiting) I think I am bound to say no, there are
plenty of ways where they are not, and where the burdens are increasing.
We have talked briefly about self-assessment of itself: I think
we could point to a number of additional elements that are bearing
more heavily on employers, for example, what they have to do or
report, whether we want to talk about the tax credit system or
many other things that it is now down to the employer to do to
make the system right. We are talking here about income tax; I
do not know if my colleague could comment on the corporate tax
side as well just to balance the picture.
(Ms Self) On the corporate tax side, the major additional
burden is the requirement to calculate and make estimated payments
of corporation tax on a current year basis, so large companies
have to estimate their current year profits in advance in order
to make those payments.
124. We will be coming to corporation tax perhaps
slightly separately from income tax a little later on. Do you
think that the self-assessment system can be simplified to reduce
some of these burdens without reforming the underlying tax regime?
(Mr Whiting) I think you can achieve some simplification
but undoubtedly, if we were able to simplify the underlying system,
that would of itself deliver more simplification to the self-assessment
system. If I could give one example, I think there is a good deal
of scope for looking hard at who gets the tax returns, accepting
that some people who get the returns necessarily have got quite
simple tax affairs and, therefore, it would be possible to give
them a much simpler tax return. The existing tax return goes part
way towards that in the basic eight pages plus the supplementary
pages, but there is a step further that could be done to get to
the two or four page return for, dare one say it, pensioners with
very simple affairs who necessarily get dragged into the system.
125. So you are suggesting, in fact, that there
should be two types of tax returnsthe cheap and cheerful
version and a complicated one?
(Mr Whiting) I think I would say one could get down
to a very basic two pager with more supplementary pages, rather
than eight pages which automatically form the core tax return.
126. Do you not feel, though, that there would
be just as much risk of people finding that there was one item
which they were not able to fit into that standard two pages?
They would then have to write off for supplementary pages, and
have a more frustrating and complex process than the present,
fairly elegant modular approach where basically, if you have a
simple situation, you find you only have to fill in maybe a dozen
questions or so?
(Mr Whiting) My response to that is I am really only
developing the modular approach into a simple "starter for
two", as it were, and then more of the modules to which I
think you and I would both subscribethe idea that you fill
in the bits you need to, and I have in mind the peoplevery
often employeeswho get drawn in because they are into the
higher rate, who really have little need of an awful lot of the
questions. Yes, if they are prepared to put the time and effort
into it, then perhaps it is not too great a burden, but I think
my response, going back to the Chairman's idea of simplifying
the overall burden and reducing that, would be simply that there
is scope for a simpler return as the core which perhaps would
not get you into so many modules as now.
127. I think we will want to follow that up.
The Revenue told us in their memorandum that one of their aims
when self-assessment was introduced was to establish a system
that was less confrontational. Do you think, five years on, they
have achieved that?
(Mr Whiting) I suppose I could say it is a bit like
Chairman Mao's observation on the French Revolution"It
is a bit early to say".
128. It was Chou-en-Lai actually, but it is
a good quote!
(Mr Whiting) I stand corrected, but you have the sense
of it. Genuinely, there is still a bit of time to go through because
the confrontational nature comes a lot with the enquiry regime,
and enquiries are really only getting going. There is scope for
more confrontation in it and I think it is in recognition of that
that all sides are keen to work together with the Working Together
initiative that ourselves and other bodies have established with
the Inland Revenue. It is to try and defuse some of the potential
for confrontation that we would rather tease out some of the irritants
perhaps within the system but frankly there is bound to be scope
for confrontation when enquiries start, particularly, as often
happens, when you do not know the reason for that enquirywhich
can cause some difficulties and, dare I say it, some grief to
129. Carrying on with the theme of simplification
for a moment, in your submission to us you refer to the introduction
of self-assessment as the necessary modernisation of the tax system.
Five years on, are you now arguing that the modernisation itself
(Mr Whiting) I think my response to that is that there
is always scope for moving on and developing and building on experience.
I stick to the views which we have always held that self-assessment
is, and was, a necessary modernisation when you look at the system
that there was there before, which is why in the earlier discussions
I would say that despite the fact there has been shifting of the
burden one accepts a certain shifting of the burden, but I think
it is a modernisation. Broadly it is a better system, but there
are improvements that could be done.
130. Is there not something to be said for stability
in the tax system as well?
(Mr Whiting) Certainly, and I think we would subscribe
131. If you subscribe to that I am slightly
puzzled that you are calling for deliberate annual changes in
the system. Does that not cut across your objective of wanting
(Mr Whiting) There is a need for stability certainly
but, dare I say it, we have plenty of changes anyway so I think
stability, being realistic, is possibly not achievable. In terms
of saying that we are calling for annual changes, I do not know
that we are calling for annual changes. I think we are looking
and saying that this system has been with us for a while, and
that there is scope for improving its way of working and looking,
as much as anything, for efficiency gains.
132. It is just that your document says that
you are challenging the Government to make annual changes to the
tax system to achieve simplification, and that suggests that some
of the simplifications are not apparent. If you have got a picture
of the simplifications that are needed, why not put them all forward
and say, "Do that lot and then it is simpler, you can leave
it alone and it will also be more stable", instead of this
incremental "Let us change something every year" approach?
(Mr Whiting) You say we should put forward our submissions.
We have so far put three papers in to Government and I have a
fourth in my briefcase compiling simplifications. We have done
them in three monthly bites, if you like, for digestibility, but
we are laying out as we see it "Quick Wins", as we have
termed them, on simplification. We would be delighted if the Government
embraced them all in one gothey are aimed both at the Inland
Revenue and at Customs & Excisebut being realistic
we did not anticipate that that would be possible, partly because
some of them take time to think about. I think our challenge and
our comment in terms of annual simplification is that, as well
as the inevitable changes that come through from the Chancellor,
it would be very nice if at each Budget and succeeding Finance
Bill there were some measures that the Chancellor announced purely
under the heading of "Simplification".
133. I understand. How would you score your
progress so far in the three papers you have submitted? In the
various ideas and proposals in the simplification, how many have
fallen on fertile ground and how many on stony?
(Mr Whiting) The papers we have submitted were one
aimed at personal tax which we submitted last summer, one on Corporate
Tax which went in in the autumn, one on VAT which went in in January
and we are about to do one on employment issuesas I say,
we have broken them into bite-sized chunks. We have been pleased
at the reception of them; we have had constructive discussions
on all three with the Treasury, with the Inland Revenue and Customs
as appropriate, and we await results, I think.
134. Have you had any results that you could
point to already?
(Mr Whiting) Only in terms of discussions, simply
because it has been a case of, as is inevitable with the tax system,
waiting for the Budget and the Finance Bill process.
135. But there have been previous budgets and
Finance Bills to which you have, no doubt, submitted suggestions.
Have you seen any suggestions taken up and delivered?
(Mr Whiting) Not many in terms of simplification.
All too often it is a case of there not being space in the Finance
Bill for a measure which is just simplification, or it would cost
too much money. So it is partly in response to that that we grouped
a batch together to put in under a coherent heading and just said
"Here are our thoughts"and we provided the Committee
with a copy of one of those papers"purely aimed at
simplification; let us just talk about these as a group and a
topic rather than in a sense allowing them to be lost in annual
Budget or Finance Bill submissions".
136. Do you follow these up in the Working Together
(Mr Whiting) They are followed up if they are of that
nature but, if they are wider ranging issuesif they are
to do with capital allowances on expensive cars, for examplethen
they have been followed up in separate discussions with the Treasury
and I think I would say that we will keep an eye on things and
will not let the subjects drop.
137. Has the change to self-assessment produced
new work or new business for you, or some combination of both?
(Mr Whiting) That is an interesting question which
we have tried to evaluate and do a little research. Inevitably
responses are subjective but our impression is that there was
a bit of a hump of work in the immediate change over to self-assessment,
particularly in terms of information giving. The impression we
got from our members, and certainly from my own personal experience
as a practitioner, was that there was a great deal of information
to be given to clients and taxpayers in general and a great deal
of explaining to do, which largely was done gratis. There was
then in some cases a number of people who came slightly fearful
of self-assessment, but many of those went away again very quickly.
Now things have settled down, if you like, with self-assessment
and my personal assessment is that there is not much extra continuing
work. The work has changed and rather than dealing with estimated
assessments, for example, which was a fairly fruitless procedure
at times, we are perhaps dealing with enquiries. So life has changed
a bit but the impression we get is that, overall, there has been
no great boom in tax work for tax advisers.
138. That has dealt with the work but what about
the flow of business? Are you saying there has been no increase
(Mr Whiting) Not a particular increase in business
to tax advisers, if that is what you are saying.
139. The Revenue's figures are that about half
the people that submit self-assessment returns
(Mr Whiting) Those are our figures as well.