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Tuesday, 15 September 2009

HMRC: world beaters

Our economy may be messed up beyond repair, our cricket team losers at any game that doesn't run overnight and the remnants of our car industry sold to the Germans, Indians and Chinese, but there is still one field where Britain leads the world, and that lead is increasing year by year - tax complexity. Once again, Britain can boast the longest written national tax code.

The government has always said that it aims to simplifiy tax legislation, and what a poor job they have done. Every September or thereabouts Lexis Nexis publish Tolley's Yellow Tax Handbook, the reference set of choice for lawyers, accountants and other tax professionals. This year's 4 volume set will put you back £106.95, which may seem a little pricey, but is actually incredibly good value at less than a penny a page, because the whole set is a world-beating 11,520 pages.

You may have thought that the Labour government were out of their depth when it came to tax legislation, but apparently not, because in 1997 the 2 volume handbook was 4998 pages long. In the last 12 years they have managed to grow the size of the book by 130%. That must have been all those stealth taxes that didn't happen.

But don't be impressed by the Rowlingesque achievement of the publishers in printing a bigger volume every year, because tax compliance is an obligation of every business and as the number of pages in these books increases, the costs of compliance for firms also increases, and employers who might want to move to the UK are dissuaded from doing so.

Readers may be aware of Lord Wilberforce’s celebrated dictum in Aberdeen Construction v Inland Revenue Commissioners that capital gains tax is a tax on gains (or gains less losses); it is not a tax on arithmetical differences. The same principle could well be applied to income and corporation taxes. It is hard to see how any but the most incompetent of governments can turn such simple principles into 11,520 pages of rules for the computation of arithmetical differences.

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