Openness and transparency
Taxpayers should understand what they are paying, why they are paying it, and what the benefits of paying will be.
Paying tax may never be fun, but engagement with a demonstrably fair tax policy will be more palatable. In addition, research indicates that better engagement with tax systems is linked with improved economic and social well-being; understanding the tax system is the first step towards engagement with it.
There should be openness on the application of tax policy.
So-called ‘stealth taxes’, such as the quiet reduction of tax exemptions, and the phenomenon of ‘fiscal drag’, whereby personal tax thresholds are not increased in line with rising prices and incomes, thus bringing more individuals into higher-rate tax bands, are an undesirable consequence of inaction and lack of scrutiny. Tax rates and thresholds should be reviewed against inflation to ensure that any divergences can be justified. Tax rises should be made openly and be subject to debate.
On major issues of tax policy, there should be clear consultation where the differing options are specified at the start and properly considered, with an audit trail that should include unambiguous minutes of meetings and written responses.
ACCA supports the use of independent tax policy committees, consisting of a body of experts, separate from government, which would be appointed and empowered to formulate and propose tax measures designed to implement government policy.
Government, under this model, would set the overall economic framework of the tax environment. It would need to define the public policy objectives (eg environmental, social welfare, etc) in terms of public finance demands and fiscal targets that the taxation measures were designed to achieve.