17 June 2019
Dr Amy Lawton blogs about her current research project, exploring how tax professionals understand and define taxes. This research has been supported by a Law School Small Grant Funding Award.

How taxes are defined in the UK is not clear. Thanks to the Bill of Rights 1689 and the decision in Attorney General v Wilts United Dairies Ltd (1922), we know that taxes in the UK need to be introduced by primary legislation (an Act of Parliament). Beyond this, the boundaries of taxes are blurred. This lack of clarity can be seen in highly publicised debates on the peripheries of taxation. It can lead to the tax label being applied to non-taxes as a political football - for example, the 2012 ‘Bedroom Tax’. It can also lead to potential revenue raisers being introduced that are disguised loosely as fees – seen in the recent debates surrounding the reformed probate fees.

Academic literature and comparative jurisprudence tell us that there are a range of features that taxes should and should not have, such as being compulsory (you have to pay it), levied by a public authority (the state), and unreciprocated (you do not get anything directly in return). Yet, there is no consensus on the subject and every feature has been open to debate. The subject was explored to some extent in Australia in the 1990s, building on Latham CJ’s judgment in Matthews v Chicory Marketing Board (1938) at paragraph 276:

“The levy is, in my opinion, plainly a tax. It is a compulsory exaction of money by a public authority for public purposes, enforceable by law, and is not a payment for services rendered.”

This encapsulates the positive and negative features of a tax outlined above but is now dated. Australian case law has progressed since Matthews, and in Australian Tape Manufacturers Association Ltd v Commonwealth (1993) it was decided to be unnecessary that a tax is levied by a public authority for public purposes. Since then, discussion around the other tax features has taken place; an example being whether the London Congestion Charge is reciprocated, and so a fee for services rather than a tax. The distinction between taxes and other fees appears to be a qualitative one.  

In the absence of a clear-cut definition of taxes in the UK, I am undertaking a research project that seeks to explore how taxes are understood by the wider, professional community, and to ask important questions on what makes a tax, a tax. Whilst those taxes with a capital ‘T’, such as Income Tax, are not disputed to be anything other than a tax; this project raises interesting questions as to the classification of wider policy instruments, such as student loans, visa charges, and NHS parking charges.

To begin to explore the key features of taxes, 50 tax professionals were interviewed between January and April 2019. These professionals were a mix of practitioners, academics, and policymakers. As such, these individuals advise on, research, and campaign for taxes on a daily basis. The purpose of the interviews was to consider how tax professionals define taxes and where the boundaries of tax lie for them. In March 2019, this project was awarded £950 of Law School departmental research funding. This funding has contributed to the transcription of the interviews.

The results so far are interesting. Preliminary findings would indicate that there is a disconnect between the theoretical literature and comparative law, and what professionals think. Whilst there was a small number of professionals who only considered the core taxes (Income Tax, Capital Gains Tax – essentially the taxes you would find in the Finance Act) to be true taxes; the majority had a much more fluid view. This more fluid view primarily looked to the relationship between the taxpayer and the state (or equivalent) and includes any enforceable cash flow to the state. This approach to defining taxes would catch a far wider range of policy instruments than the more rigid features of taxes outlined, for example, in Matthews. Moving forwards, it may be impossible to classify taxes on the basis of rigid, inflexible features.

The constitutional impacts of this are significant and raise questions as to who should classify taxes; whether there should be a greater transparency in terms of revenue raisers to the public; what the role is for democracy in allowing voters to have an input on all ‘taxes’; and how we could or should shape the narrative around taxes to paint the truest picture of reality. This research project will begin to explore these questions and start to paint the picture of what a tax is in the UK.