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Should tax be a cross party issue?

By RJP LLP

Should tax be a cross party issue?

After reviewing the different tax policies announced in the recent PBR I couldn’t help but reflect upon how politically motivated tax has become. It is a key political issue (not to mention weapon!) and the parties bicker constantly over it. Whatever one says the others disagree with. Just because. Even if they then do a u-turn and brazenly adopt the other’s potentially good idea!

How fair is that on the tax payers of the UK? The answer is it’s not. Look at policies introduced throughout history for some shining examples of where politics undermined policymaking – higher rate taxes, abolition of MIRAS and pension tax credits for instance.

There is no doubting that tax legislation is clearly very politically motivated and decisions are not always made with the stability of the country in mind. If we are to reach a point where tax and politics are not so completely tied up in one another, some more drastic measures may need to be considered.

Look at the Bank of England for an example of what could be done. In May 1997, the Government granted the Bank of England operational independence allowing it to set domestic interest rates. (We should remember that the government retains control of the final objective of monetary policy – the Government sets the inflation target within which the Bank must operate when carrying out monetary policy decisions). The general perception though is that the Monetary Policy Committee has worked in a harmonious manner and that their deliberations have been genuinely free from political influence.

The Treasury meanwhile is a department of state and part of the government. It works to the government of the day, whatever the political persuasion and in that sense is not independent and can never be seen to be. Would things not vastly improve if we had a system whereby the Treasury was no longer linked to the government but an independent, non political body with representatives from all the parties working together towards achieving say a target revenue for the government’s purse?

If the Treasury became a cross party institution the very concept of tax could be re-thought. By taking politics out of the tax system then decisions really would be made for the good of the country as a whole and we would end up with a much fairer system than the one we currently have.

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