Alistair Darling, the new chancellor, has placed consistency and fairness at the centre of his tax policy and committed himself to ensuring that all residents pay their fair share of tax.
Darling set out his aims in an interview with Accountancy Age, where he rejected claims that the UK was a tax haven and unjustly favoured non-domiciled residents.
‘The IMF does not categorise the UK as a tax haven. This was suggested by some organisations on the back of some seriously flawed experimental methodology for identifying tax havens. The government is committed to ensuring a fair and consistent tax system, and ensuring that everyone pays their fair share of tax,’ the chancellor said.
Darling also said the government had made ‘very important changes’ to reduce tax avoidance in order to ensure fairness. ‘This is important to the continued funding of our essential public services,’ he said.
The chancellor’s promises to uphold fairness and protect tax revenues come as the UK tax system faces a barrage of criticism from unions and tax campaigners for being unfair.
A recent IMF working paper (which does not represent the official view of the body) classified the UK as an ‘offshore financial centre’, alongside jurisdictions such as the Cayman Islands and Bermuda. A DTI website was found to be promoting the UK as a tax haven.
The campaign against the private equity industry has also criticised UK tax rules and honed in on the non-domiciled regime as it favours foreign buyout bosses based in Britain. However, Darling would not commit to reforming the controversial rules, saying he would not make tax policy on the hoof.
‘This is a complex area and we have an ongoing review considering the whole issue. Once we see the outcome of that review, we will take stock on what we need to do next. Whatever we do will be in the best, long-term interests of the country. Any changes we make to tax will be done in the context of the Budget and pre-Budget report,’ he said.
Darling said the Treasury would continue to offer research and development tax credits, even though there were suggestions that the system had been abused by some businesses.
In 2005, HM Revenue & Customs was forced to crack down on claims for the reliefs when there were indications that businesses were claiming credits to which they were not entitled. There were also suggestions that the credits could be sacrificed to fund headline tax cuts.
But the chancellor maintained that the R&D programme was a key part of government’s plans.
‘As a former trade and industry secretary, I have seen first-hand the benefit this can bring to the UK. I am, of course, a strong supporter of measures to encourage that,’ Darling said.
