In this time of uncertainty, sharing wider views on the direction of tax policy is critical. Stella Amiss, Head of Tax Policy at PwC discusses the outcomes of some of our recent focus-group workshops with students from Manchester Business School with Wendy Wild, University lecturer at Alliance Manchester Business School and Iain McCluskey, Partner at PwC. Transcript is attached.
Hello, Barry Murphy is not with us today, so I am standing in for the chair. I am Stella Amiss, I am a tax partner here at PwC, and welcome to the latest episode of the ‘talking tax podcast,’ where we delve into some of the most topical tax issues of the day.
At PwC, we’ve been engaging with business leaders and the wider public on tax policy, to hear the perspectives from a wide range of stakeholders on the tax system. The current uncertainty around the UK’s relationship with the EU, together with future demographic and technological challenges all raise questions as to how we should go about shaping our future.
So, over the last year, we’ve run several focus group workshops, made up of diverse groups of youths from across the political spectrum. Most recently, we went to find out what our student community think.
Today, I am really pleased to say that I am joined by Wendy Wild, University lecturer at Alliance Manchester Business School; and Iain McCluskey, a tax partner here at PwC. Wendy and Iain took part in our student discussion and are here today to share some thoughts of the insights that we heard there.
Iain, do you want to kick off and give us a brief outline of what we asked our students to think about?
First thing to talk about, I guess, is a citizen’s jury, what is it. It’s basically bringing together a group of people for their perspective on something, in this case, the tax system. Because, I’ve got my own views of the tax system, you’ve got your own views of the tax system, but for the richness of the tax debate, we need to engage with a broad set of stakeholders. The objectives of this was really to better understand public opinion and we need to start somewhere. We thought we’d put a workshop together around Brexit. Effectively those four scenarios, were one which was based on tax competition, another one which is the UK really having a tax system that encourages innovation, one which is focussed more on addressing inequalities in our tax system and one which offers a more decentralised model in terms of devolved tax powers to the regions, and more to Scotland and Wales, etc. We ran that up in Manchester with Wendy and a set of fantastic students, who joined us to give their perspectives.
Perfect that sets us up nicely. Thank you Iain.
Wendy, can I turn to you, thanks again for coming down to London to come and talk to us today. Was this something that you found your students had some strong views on?
Yeah, it certainly was a worthwhile exercise, and it provoked some healthy discussions and some strong views came through, especially around the dynamics of the different scenarios. Particularly the trade-offs and the difficult decisions that would have to be made across the scenarios, and who the winners and losers are on each of the scenarios. The students were really good, because they thought beyond the personal issues, like society wider, was of interest of them.
So, really put tax into its broader context, it wasn’t just focused on the technicalities?
Oh definitely, and it wasn’t just about what’s in it for me, it was, what’s sustainable for society as a whole.
I thought one thing that was great about the students actually, they were from very diverse backgrounds, with quite a few international students in the room, so we had students from Singapore, and China, and also mainland Europe. We also had a range of ages in there as well. We had some mature students, and some students who were in their late teens and early twenties, so actually it contributed to a really rich debate on the day.
Really good cross section.
Wendy, if you reflect back, were there any particular scenarios that really seemed to resonate with the group?
The students really liked creating a competitive environment, and that went down very well. They liked the idea of using the tax policy for innovation purposes. The only caveat was they wanted less regulation, it was a bit of a concern to them, which for some of was bit of a surprise.
The students themselves felt quite happy with this competition scenario, but they recognised that there would be winners and losers. So, they had to be looked after and it could potentially have greater inequalities in that type of environment. So, they certainly had concerns around that. They did question, interestingly about lower taxes, particularly for business. They didn’t think necessarily that would create investment and I think that was a recognition that they realise that business decisions were quite complex.
It sounds like they were more at the business friendlier end of tax policy, but not to go down the route of lowering tax.
No, not necessarily, they wanted to keep it all very balanced, I think.
Sounds like a good discussion.
Iain, was there anything that stood out particularly for you from the debate?
The scenario which was, I guess, a more left wing scenario, where the tax system is used much more about re-distribution and building a more equal society, did actually generate a lot of discussion. A lot of students thought that was a good model to raise children and possibly deal with some of the demographic challenge of having an aging population, and also would reduce levels of wealth and regional and generational inequality. I guess where the concern came from that scenario was is something like universal basic income, which provides a safety net to everyone, is that really affordable and also a debate actually around, does that give incentive to people to drive forward in their careers and progress economically in their life.
But really the model which got rejected, of the four of them, was the devolved tax system. So they suggest more tax powers going to local authorities or Scotland, Northern Ireland, and Wales. People saw that as not really a cohesive tax system and actually that it might drive greater inequality because of the intrastate competition it might generate.
It does really sound like you got stuck in to each of those different scenarios, I know you didn’t have a huge amount of time, but it did sound like you’ve covered an awful lot of ground.
Yeah, very much so.
If you stood back, were there any general themes that came out that weren’t scenario specific.
The main theme for me was, whatever policy direction you go in, you need to communicate it very clearly to the taxpayer and the electorate really, getting their buy-in, and explaining what this tax is going to be used for, especially where there is going to be winners and losers.
That’s something definitely that’s come out of from our previous surveys, studies, and discussions.
Probably one of the scenarios where there was a bit of a step back from the tax system itself, was this model where the UK becomes a technology hub. The concerns there weren’t really about what tax outcome does that generate, much more about, do we actually have the sufficiently skilled workforce at the moment to deliver on that model? The students would say, we probably don’t at the moment, and what does that mean in terms of investment into education and training, and then you need to devise a tax system around that first. I think, that’s probably the one scenario where we really came back out of detail of the tax system, and started talking more broadly about skills and the needs of that economy to serve it.
Again, that’s really fascinating that you managed to go into those wider societal issues and not just focus on tax technicalities given the group that you were talking with as well, and in such a short space of time. So, that sounds like it’s a really interesting mix of issues, and as you said, Iain, moving onto the items around and beyond tax.
Wendy, I know the students have been looking in their course work at what makes a good tax system. Was there anything that stood out to them that was over and above some of the more theoretical things they had been learning about, and what makes a really good tax system?
They all knew about the Adam Smith canon of taxes, so I didn’t have to educate them on that front. However, they extended those somewhat, and included flexibility and understandability. They were two of the key themes. They liked a tax system that had a broad base and that they could see would be sustainable into the future.
That’s interesting that they wanted the flexibility, because that goes back to your point about one of the things that they really liked were those more competitive tax systems and you need that flexibility to deliver on one of those.
They recognised that we are in a dynamic world. So, you’ve got to be able to react quite quickly.
Did it generate any observations on the current tax system and how that’s working?
Well they certainly liked the progressive nature of it. They liked sin taxes, only they didn’t say what a sin was, and they liked the ability to pay it, and how it’s easy to pay in the UK, I think relating to pay as you earn. Some of the areas that they weren’t too keen on, was the complex nature of some of the taxes that we have. I think they recognised that makes it an expensive tax system, both for HRMC, but also the taxpayer. They would like a clearer understanding for the electorate of how it gets used, how is it spent.
That goes back again to that communications point that you raised earlier, being really clear about what you are trying to do and why you are trying to do it, engage the voting public in the tax system.
Just one more thing I can add to that, and it’s a word I have never seen associated with a tax system before. Someone said that the tax system should should be kind. And that provoked quite a debate, that the tax system, and the HMRC, and the Tax Authority, had this impression of it being a, cold dark thing. Actually, they said well tax should be kind, it should support you when you need it, and the interactions with it should be warmer and fluffier quite frankly, which is a challenge to every tax authority around the world.
And taxpayer indeed, goes both ways.
Just to try and pull things together, it does sound like you had a rich discussion over many different areas, not just on tax policy, but broader issues, what are the key conclusions or key takeaways you both individually took away from that discussion?
In summary, the students identified with each scenario, although they did recognise and voice some of the concerns with each model, so there wasn’t one model that they thought was utopia. They were supportive of obviously the competitive tax system, because for them it stimulated investment, they could empower citizens and there was some scepticism about how fair this scenario might be, so that would have to be addressed.
Yeah, I think that balance point was the overriding conclusion of the students. Yes, businesses flourish in strong societies with empowered healthy citizens, so they recognise the need to have a competitive tax system, but also recognise that that could only go so far, and you need a good tax system, which delivers healthy, thriving, well-educated, trained citizens for the future.
I am so pleased that we did this discussion because I think it demonstrates it’s not good enough to just talk amongst ourselves to understand what we think the tax system needs to deliver. Engaging with the student population especially, is really important, because obviously they are the voters of the future, they are the people who are going to be shaping our future, so I am so glad that we are able to do that.
It demonstrated what we’ve known all along that designing tax policy is so difficult to do, it’s so complex, so many trade-offs all the way through. But part of the key to success will be, as you’ve said Wendy, making sure that we can bring people together to discuss these issues and that government can try and do a bit more about too, it’s a two way thing.
That draws a close to our talking tax podcast for today. Thank you Wendy, again thank you ever so much for joining us, and Iain of course, for both facilitating our discussion with students, coming back and talking today and it has given us a real snapshot of what our younger generations want to see in our tax system, so thank you.
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