Tax advisers concerned new Bill undermines Senedd scrutiny

In its submission¹ to the Welsh Parliament’s call for evidence on the Local Government Finance (Wales) Bill², the CIOT expresses concern about the Bill’s granting of extensive powers to ministers to amend important aspects of the taxes such as reliefs and exemptions using regulations (also known as secondary or subordinate legislation). While such regulations can be rejected by the Senedd, unlike bills (primary legislation) they cannot be amended. Bills usually have a four stage parliamentary process (sometimes five), but these regulations will be discussed by the Senedd only once.

Areas that the Bill enables to potentially be changed by regulations in the future include small business rate relief and exemptions such as those for agricultural premises and places of religious worship.

In its submission the CIOT recommends that:

• Substantive changes to reliefs be included in primary legislation to ensure proper scrutiny and effective policy development.
• The framework for consultations on subordinate legislation be clarified to avoid potential rejection of regulations, which could lead to unnecessary administrative costs and delays.

The Institute also raises concerns in relation to Welsh ministers’ powers to set differential business rates multipliers, which could potentiality create uncertainty and add complexity³.

Ritchie Tout, chair of the CIOT’s Welsh Technical Committee, commented:

"The Welsh Government and the Senedd deserve credit for biting the bullet of business rates and council tax reform, which other parts of the UK have ducked. However we are concerned that future reforms may not have this level of scrutiny.

“The Senedd is being asked to make laws without knowing how the powers conferred will be exercised by Welsh ministers and so without the knowledge or ability to influence how any changes could impact taxpayers in the future.

“We are concerned that granting ministers such powers could undermine the essential work of the Senedd, and other interested parties, in scrutinising the government and its legislative proposals.

“While we welcome the Welsh Government’s commitment to reviewing business rates relief, in our view secondary legislation should generally be reserved for administrative matters and rate setting. Substantive changes to areas like reliefs and exemptions should be made by primary legislation, with committees taking evidence and the full process of debates, scrutiny and potential amendments in the Senedd.

“It is important to note that changes to reliefs and exemptions for business rates involve trade-offs. Even if a change appears generous for those in scope it may indirectly place tax liabilities on other sectors. Decisions like these deserve full parliamentary scrutiny.”

Notes for editors

1. Read the CIOT’s submission here.
2. Measures in the Local Government Finance (Wales) Bill include:

• more frequent business rates revaluations (three-yearly),
• additional powers for Welsh ministers to change business rates reliefs and exemptions using regulations,
• the introduction of differential multipliers based on descriptions,
• a duty on ratepayers to provide certain types of information to the Valuation Office Agency, along with provision for an associated compliance regime,
• providing flexibility for changes to the banding structure for council tax,
• placing a duty on the Welsh Ministers to make a single national Council Tax Reduction Scheme through regulations,
• establishing a five-yearly cycle of council tax revaluations.

1. In Wales, a single multiplier applies to all properties, set by the Welsh ministers through regulations. Elsewhere in the UK, tiered multipliers (or poundage) exist, with lower multipliers for properties below a certain value and higher multipliers for those above.