IoD in call for tax review

Business and government would save millions if the system of collecting tax from companies was simplified, according to a report to be published tomorrow.

The report from the Institute of Directors calls for a review of the way tax legislation is structured. It claims to have found 100 ways to make the system simpler.

The report highlights the need for the administration of PAYE and National Insurance contributions to be amalgamated - or at least co-ordinated - so that employers can avoid having to report information about their employees to both the Inland Revenue and the Department of Social Security.

"No one has provided an adequate explanation as to why we have two different tax systems running in parallel. It is driving our members mad," said Richard Baron, a tax specialist at the IoD and author of the report. He added that a recent survey of member companies had shown a large majority in favour of reforming the collection system.

The IoD report will also take the Government to task for hurrying tax legislation through parliament, particularly the current Finance Bill, which is now at the Commons' committee stage and is scheduled to come into force on 5 August - just 28 days after the legislation was first published.

"MPs do not have time to examine the issues and get outside advice, and they end up getting steamrollered into quick decisions about things they might not fully understand," said Mr Baron.

This theme was taken up separately in a report last week from the tax division of the Institute of Chartered Accountants, which expressed concern at the "very limited time that was allowed to consider the details of the [Finance] Bill."

Peter Hobbs, head of tax at the ICA, said that previous significant changes to corporation tax law had been preceded by extensive consultation but that very little thought had been given in this instance to the abolition of advance corporation tax credits for pension funds, the abolition of foreign income dividends (Fids), and the introduction of the windfall tax.

"Here we have wholesale changes to the corporation tax regime and only three days to make comments between the Bill's publication and its committee stage," said Mr Hobbs.