The CIOT and LITRG have responded to the inquiry by the Finance Committee of Senedd Cymru (Welsh Parliament) into the Welsh Tax Acts etc (Power to Modify) Bill. In summary, the CIOT and LITRG’s responses are as follows:
Tax law should be set out in primary legislation particularly in so far as it relates to the exercise of tax powers setting out what is subject to tax and imposing burdens on taxpayers. Secondary legislation should ideally be used only for administrative matters. Introducing primary legislation for tax changes via an annual Welsh finance bill does present challenges, however; currently the volume of legislative change required is probably insufficient to justify an annual finance bill process in Wales.
Where regulations made under the powers in the Bill make complex amendments, it should be the norm to publish (ideally simultaneously) a consolidated version of the law as amended to aid transparency and comprehensibility of the law.
It seems reasonable for Welsh ministers to make subordinate legislation to modify the Welsh Tax Acts for four purposes as set out in Chapter 5 of Part 1 of the Explanatory Memorandum, with the caveat that there is quite a wide discretion particularly in relation to the undefined term ‘tax avoidance’. The use of such powers will need to be based on evidence and subject to scrutiny.
Retrospective legislation that imposes or increases a tax charge on income earned, gains realised or transactions concluded at a time before the legislation was announced, should be used with extreme care and justified in detail.
Where the Welsh Revenue Authority identifies artificial avoidance activity, a similar approach to the spotlight system used by HMRC should be considered to give early warning to taxpayers that such avoidance schemes are not effective.
The CIOT and LITRG have responded to the inquiry by the Finance Committee of Senedd Cymru (Welsh Parliament) into the Welsh Tax Acts etc (Power to Modify) Bill. In summary, the CIOT and LITRG’s responses are as follows:
Tax law should be set out in primary legislation particularly in so far as it relates to the exercise of tax powers setting out what is subject to tax and imposing burdens on taxpayers. Secondary legislation should ideally be used only for administrative matters. Introducing primary legislation for tax changes via an annual Welsh finance bill does present challenges, however; currently the volume of legislative change required is probably insufficient to justify an annual finance bill process in Wales.
Where regulations made under the powers in the Bill make complex amendments, it should be the norm to publish (ideally simultaneously) a consolidated version of the law as amended to aid transparency and comprehensibility of the law.
It seems reasonable for Welsh ministers to make subordinate legislation to modify the Welsh Tax Acts for four purposes as set out in Chapter 5 of Part 1 of the Explanatory Memorandum, with the caveat that there is quite a wide discretion particularly in relation to the undefined term ‘tax avoidance’. The use of such powers will need to be based on evidence and subject to scrutiny.
Retrospective legislation that imposes or increases a tax charge on income earned, gains realised or transactions concluded at a time before the legislation was announced, should be used with extreme care and justified in detail.
Where the Welsh Revenue Authority identifies artificial avoidance activity, a similar approach to the spotlight system used by HMRC should be considered to give early warning to taxpayers that such avoidance schemes are not effective.
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