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Tax advisers' address
Tax advisers' address
The annual address organised by The Chartered Institute of Taxation was held on the evening of 14 May 2002 and the speaker was Lord Templeman. His topic was, as may be expected, the evils of tax avoidance, and he rehearsed the early Ramsay cases showing the development of the judicial anti-avoidance principle, culminating in Lord Brightman's seminal judgment in Furniss v Dawson [1984] STC 153. Lord Templeman was clearly unhappy with Lord Hoffmann's recent inroads into the Ramsay principle (Westmoreland Investments Ltd v MacNiven [2001] STC 237). He thought that where there was any preconceived plan to avoid tax (a 'trick'), Ramsay should be free to attack it. Unfortunately there was no analysis of exactly what constitutes a plan, although one can guess from Lord Templeman's dissenting judgment in the Fitzwilliam case [1993] STC 502 that he would not be too keen on detailed analysis as to whether end steps were in place when opening steps in a scheme are embarked upon. What on earth he would make of current Mauritius schemes one dreads to think.
Much of this was of historic interest only, although an eminent audience including a Law Lord, High Court judge, Special Commissioner, barristers and leading members of the profession turned out in force to hear the great Revenue champion once again.
More interesting was the question session which followed. A recurring theme was the problem of tax complexity and the urgent need for simplification of the system. A chartered tax adviser in the audience found it beyond her ability to operate VAT partial exemption for a local club; others complained that it was beyond the wit of the ordinary citizen to cope with even basic personal tax. In response, the Revenue representative, Dave Hartnett, said that if people are going to resort to things like paying themselves in contingent reversionary interests in offshore trusts, one could not expect the tax system to be simple to cope with it. He got away with this, but it was a poor example; the DTE Financial Services case which involved this scheme was struck down by no more than the good old-fashioned pay-as-you-earn provisions.
Another theme from the audience was that it would be more honest to the nation if the Government were now to admit that National Insurance contributions is actually a tax, although honesty is not, we gather, a matter of enormous significance to politicians, Dave Hartnett defended the status quo on the basis that there is a contributory principle in National Insurance which the Treasury is keen to retain and to abolish it would be expensive. The audience was unpersuaded, with one member forcefully making a case for the present position being no more than a fraud conducted on the general public, who were being given a clear impression that there was some kind of insurance involved and they were paying into a fund for their future benefit. Lord Templeman, who had earlier railed against tax avoiders because they took money from the Treasury which was much needed to meet important state expenditure, suddenly shifted to the opposite viewpoint; as a pensioner he does not pay National Insurance contributions and would not welcome a change which would bring him into the net.
As always, personal perspectives coloured each person's viewpoint but happily no longer is it the case that east is east and west is west and never the twain shall meet; both the President of the Chartered Institute and the Revenue's representative acknowledged the very helpful role played by the ongoing consultative discussions between the two organisations.
