IN CORPORATION TAX REFORM by EDWARD JOHN SNAPE
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PUBLIC LAW AND PUBLIC MANAGEMENT: ‘THEORY’ AND ‘VALUES’ IN CORPORATION TAX REFORM by EDWARD JOHN SNAPE M.A. (Oxon.), Solicitor A thesis submitted to the University of Birmingham for the degree of DOCTOR OF PHILOSOPHY Birmingham Law School, The University of Birmingham, April 2008. University of Birmingham Research Archive e-theses repository This unpublished thesis/dissertation is copyright of the author and/or third parties. The intellectual property rights of the author or third parties in respect of this work are as defined by The Copyright Designs and Patents Act 1988 or as modified by any successor legislation. Any use made of information contained in this thesis/dissertation must be in accordance with that legislation and must be properly acknowledged. Further distribution or reproduction in any format is prohibited without the permission of the copyright holder. ABSTRACT Reforming the UK’s corporation tax code is becoming more of a widespread political concern than the preoccupation of specialists. This functionalist study offers an interpretation, and assesses the arguments. It views the corporation tax code as public law, energised by political values whose meaning and prioritisation are shaped by the prudential logic of effectiveness. The institutions that generate the code, and the challenges of globalisation to the nation state, have highlighted historic tensions between Crown and Parliament, and the latter’s scrutiny of the managerialist governance style that the code’s reform involves. This style is apparent in the ideology of the public interest that reform is designed to promote, a process that involves the skilful balancing of efficiency and fairness. Surprisingly, perhaps, there is little in the conduct of reform that violates the traditions of the UK’s representative democracy. The result is a code that, given its public law status, is a pre- eminent example of political jurisprudence. Its values, their prioritisation, and their change and complexity, are inevitably contentious, because they are the products of representative institutions. Criticism of the code generally understates these points. What are presented as impartial legal arguments are often simply rival views of the public interest. ii To the memory of my father, Eddie Snape, and of my mother, Betty Snape. Requiescant in pace. iii ACKNOWLEDGEMENTS I should like to thank the following: my supervisor, David Salter, the University of Warwick, for his thoughtful advice and comments; Nottingham Law School, the Nottingham Trent University, for its assistance with tuition fees in the earlier part of the work; Philip Ridgway, City University, and colleagues at the University of Warwick, especially Professor Roger Burridge, Roger Leng, Rebecca Probert and Gary Watt, whose generous support and assistance in the final stages of the work allowed me to complete it. Most of all, I should like to thank my wife, Dr Angela Kershaw, for her love and support over the years that the work has occupied my time. Angela has shown the greatest interest and encouragement at every stage, and I am deeply grateful to her. My father, Edward Snape, and my mother, Elizabeth Brigid Snape, died within three weeks of each other, almost to the hour, as the study was in its last stages, and it is therefore respectfully dedicated to their memory, with love and with gratitude for their encouragement and example. Andrew Snape and Dr Michael Snape have been to me all that brothers could be over these difficult months. E.J.S., 29 February 2008. iv TABLE OF CONTENTS Abstract ii Dedication iii Acknowledgements iv Table of Contents v Table of Abbreviations viii Note on biographical details xiv Note on dates xv CHAPTER 1: INTRODUCTION 1 Corporation tax reform 1 Theorising corporation tax reform 16 The politics of corporation tax reform 24 The technical and the political 25 Politics and ‘the art of government’ 31 Values, theory and public law 38 ‘Values’ in public law 41 ‘Theory’ in public law 47 An ‘interpretative’ and ‘functionalist’ approach 50 Corporation tax as public law 57 CHAPTER 2: THE REFORMERS 74 Prologue 74 v Institutions and objectives 83 Governance, public management and corporation tax reform 87 The corporate sector and the state 100 Parliament 108 H.M. Treasury and H.M. Revenue and Customs 117 Policy networks 128 Her Majesty’s judges 137 Some interim observations 146 CHAPTER 3: THE PROCESS OF REFORM 149 Prologue 149 Processes and Interactions 157 The ‘political’ element in corporation tax reform 164 Ideas of ‘the political’ 165 Politics, policy and reform 169 Politics and political economy 173 The public interest in corporation tax reform 175 ‘The public interest’ and ‘the common good’ 176 The ideological nature of the public interest 180 Initiating reform measures 184 Developing the measures 195 Presentation of reform measures 211 Delivery of reform measures 213 Some connections 215 vi CHAPTER 4: THE EVOLVING CORPORATION TAX BASE 219 Prologue 219 Economics, realism and politics 225 Further implications of the public law nature of corporation tax 232 ‘Complexity’ and ‘instability’ in the corporation tax code 240 ‘The rule of law’ 241 ‘Complexity’ 244 ‘Instability’ 247 The prioritisation of political values in the corporation tax code 250 Efficiency 257 Fairness 273 Concluding comments 293 CHAPTER 5: CONCLUSIONS 296 ‘Theory’ and ‘values’ 296 Actors ‘in concert’ 300 Prudence in the reform process 304 Corporation tax as ‘political jurisprudence’ 309 Bibliography 313 vii TABLE OF ABBREVIATIONS AC Law Reports, Appeal Cases ACE allowance for corporate equity A.-G. Attorney-General ACT advance corporation tax All ER All England Law Reports ASB Accounting Standards Board BBA British Bankers’ Association BJPIR British Journal of Politics and International Relations BTR British Tax Review CA 1985 Companies Act 1985 CA 2006 Companies Act 2006 CAA 2001 Capital Allowances Act 2001 C.B. Chief Baron (of the Exchequer) CBI Confederation of British Industry CCCTB common consolidated corporate tax base CFC controlled foreign company Ch Law Reports, Chancery Division CIOT Chartered Institute of Taxation C.I.R. Commissioners of Inland Revenue CJQ Civil Justice Quarterly viii CLJ Cambridge Law Journal CLR Commonwealth Law Reports (Australia) CLSA Current Law Statutes Annotated Cm Command Papers (Sixth Series, 1986 onwards) CMLR Common Market Law Reports CMLRev Common Market Law Review Cmnd Command Papers (Fifth Series, 1956-1986) Conv. Conveyancer and Property Lawyer CRCA 2005 Commissioners for Revenue and Customs Act 2005 CSIH Inner House of the Court of Session CTSA corporation tax self-assessment DLR Dominion Law Reports (Canada) EBT employee benefit trust ECHR Convention for the Protection of Human Rights and Fundamental Freedoms (‘the European Convention on Human Rights’) ECtHR European Court of Human Rights ECHRDR European Commission of Human Rights Decisions and Reports ECJ European Court of Justice ECR European Court Reports EHRR – Comm Supp European Human Rights Reports – Commission Supplement ER English Reports ix ESC Extra-Statutory Concession EWCA Court of Appeal of England and Wales EWHC High Court of Justice of England and Wales FA Finance Act FB Finance Bill FDI foreign direct investment Fla. Tax Rev. Florida Tax Review FMI Financial Management Initiative FOREX foreign exchange FS Fiscal Studies GAAP generally accepted accounting practice GAAR general anti-avoidance rule GANTIP general anti-avoidance principle GATT General Agreement on Tariffs and Trade Harv. L. Rev. Harvard Law Review H.M. her Majesty’s HMG H.M. Government HMRC H.M. Revenue and Customs HMSO Her Majesty’s Stationery Office HRA 1998 Human Rights Act 1998 IAS International Accounting Standard IASB International Accounting Standards Board IASCF International Accounting Standards Committee Foundation x ICAEW Institute of Chartered Accountants in England and Wales ICTA 1988 Income and Corporation Taxes Act 1988 IDS Bulletin Institute of Development Studies Bulletin IFS Institute for Fiscal Studies IMF International Monetary Fund IRC Commissioners of Inland Revenue ITA 2007 Income Tax Act 2007 ITEPA 2003 Income Tax (Earnings and Pensions) Act 2003 ITTOIA 2005 Income Tax (Trading and Other Income) Act 2005 JBL Journal of Business Law J. Env. L. Journal of Environmental Law Jnl Publ. Pol. Journal of Public Policy Jo. of Law & Soc. Journal of Law and Society LQR Law Quarterly Review LS Legal Studies LT Law Times MLR Modern Law Review MNC multinational corporation MP Member of Parliament MR Master of the Rolls NAO National Audit Office Nat. Tax Jo. National Tax Journal NLJ New Law Journal xi NPM New Public Management OECD Organisation for Economic Co-operation and Development OJ Official Journal of the European Communities OJLS Oxford Journal of Legal Studies PFI Private Finance Initiative PL Public Law PN Press Notice PPP Public-Private Partnership QB Law Reports, Queen’s Bench Division QC Queen’s Counsel RIA regulatory impact assessment Sched. Schedule (to a statute) S.I. statutory instrument S.O. Standing Order of the House of Commons SP Statement of Practice SpC Special Commissioners’ case Stat LR Statute Law Review STC Simon’s Tax Cases STC (SCD) Simon’s Tax Cases (Special Commissioners’ Decisions) St. Tr. State Trials SWTI Simon’s Weekly Tax Intelligence TAAR targeted anti-avoidance rule xii TC Tax Cases TCGA 1992 Taxation of Chargeable Gains Act 1992 TJN Tax Justice Network TSO The Stationery Office UKHL United Kingdom House of Lords UKHRR United Kingdom Human Rights Reports VAT value added tax VATDT VAT and Duties Tribunal V.-C. Vice-Chancellor WLR Weekly Law Reports WN Weekly Notes WTO World Trade Organization YLJ Yale Law Journal xiii NOTE ON BIOGRAPHICAL DETAILS In cases where it has been considered appropriate to include biographical details of individuals referred to in the text, the sources of the relevant information have been abbreviated as follows: ODNB (Oxford Dictionary of National Biography: from the earliest times to the year 2000, ed. by H.C.G. Matthew and Brian Harrison (Oxford: Oxford University Press, 2004)); Dod (Dod’s Parliamentary Companion 2005 (London: DOD, 2005)); and WW (Who’s Who, 159th edn (London: A&C Black, 2007)).