A new report, ‘Certainty in Tax’, from the Association of Chartered Certified Accountants (ACCA) urges tax policy makers to clearly communicate the aim of each tax measure for the benefit of tax payers.
Simplicity is key
The report states that tax systems should minimise unfair outcomes, with any grey areas defined in as much detail as possible and accompanied by clear guidance. According to ‘Certainty in Tax’, simplicity and stability are key to a good tax system, while conceding that a degree of uncertainty will always exist.
Author of the report Jason Piper, ACCA’s Technical Manager, Tax and Business Law, said: “Regular and constructive dialogue should be a feature of a healthy relationship between business and the state. The outcome of those discussions could be formalised and even published to aid transparency and certainty for both businesses and tax officials, and could form part of the clear guidance which we believe is vital.”
Tackling the threat of retrospective legislation
The report states that the “most potentially devastating form of uncertainty is that introduced by the threat of retrospective legislation”.
While most governments only use such legislation to counter clear abuse, the report says it does happen and the damage done to taxpayer confidence in the system is considerable.
Jason Piper explained: “If an uncertain system allows such dishonesty to persist, it will reduce domestic confidence in the administration, and may discourage investment by businesses from other jurisdictions, which means it is in the state’s interest to reduce the scope for such developments.
“Clear communication of the aims of each tax measure will help taxpayers recognise what is expected of them, although it will impose on policymakers the burden of actually understanding what they want to do and how they are trying to achieve it.”
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