I.Introduction
This book is about the position of tax law within the UK constitution. At first sight, this is familiar ground. It is well-known that the constitution has been shaped by a number of historical disputes involving the public finances, including the Magna Carta, the Petition of Right, the Case of Ship Money,1 the Glorious Revolution and the Peopleâs Budget of 1909. Curiously, though, much less has been said about the relevance of tax to the contemporary constitution, despite some pioneering work by scholars such as John McEldowney and Tony Prosser, and some recent intimations that Finance Bills might once again find themselves at the centre of wider constitutional controversies.
The ambition of this book is not only to examine the constitutional aspects of tax law but to do so in a dynamic setting. This point has two aspects. On the one hand, constitutional change might destabilise otherwise settled areas of tax law. On the other hand, the way in which taxes are imposed, administered and adjudicated might help to shape the constitution as it develops. This latter possibility is perhaps more obvious in the context of the historical events, listed above, but is worth searching for in the contemporary UK despite problems of proof.2 A different way of putting the same point is that there is potential value in examining ongoing events in the UK as a transient period in history, whilst recognising that we lack the benefit of hindsight.
A useful starting point for this type of project is the seminal essay of Joseph Schumpeter, The Crisis of the Tax State3 in which revenues are treated both as fundamental to the existence and nature of a state and as subordinate and instrumental to that state in normal times. This points to a further aim of the present book, which is to enquire whether there is anything in the contemporary UK tax system that could be described in terms of âstate buildingâ, in the sense of providing the revenues and structures within which states are able to form, survive and develop. In turn, this leads me to doubt the otherwise useful categorisation by Avi-Yonah of the functions of taxation, being revenue-raising, redistribution and regulation.4 Keeping the state afloat and shaping its future evolution does not fit easily within any of these categories. This point is revisited in more detail below and in chapter six, where there is a fuller discussion of how constitutional law and state building might relate in a UK tax context.
To summarise the argument of the book, compelling evidence is found that constitutional change within the UK is relevant to a proper understanding of our evolving tax system. The converse suggestion, that decisions made in the tax field may influence wider constitutional developments, is predictably much more difficult to substantiate. Nevertheless, the evidence reviewed within chapters two to five of this book allows the following spectrum of conclusions to be made. At one extreme, it can be said with confidence that tax and trade law considerations have exerted a decisive influence on the controversies surrounding the status of the Irish border post-Brexit. At the other extreme, it can be said with similar confidence that the attempts to improve tax scrutiny and reform at Westminster, however welcome they may be, have limited salience outside the tax field. Between these extremes, there are cases in which there is persuasive evidence of the relevance of tax to wider constitutional questions. A good example is the pursuit by the Scottish institutions of broader tax powers, seemingly with the aim of deepening the devolution settlement. There are also cases in which the evidence is more equivocal but nevertheless indicates the potential for further investigation. For instance, the weakness of human rights law in the face of rapidly accumulating HMRC powers is, at the least, consistent with wider anxieties about the potential loss of previously secure revenue streams and concerns about the maintenance of state capacity more generally.
This conclusion, that taxation does indeed play a role in constitutional evolution but that the evidence is stronger in some places than others, is intuitively appealing on a number of grounds. First, drawing on Schumpeterâs point, revenue-raising is critical to the establishment of a state but is thereafter subject to the usual constitutional arrangements of that state. Secondly, many constitutional crises seem to involve the channelling of wider discontent into tax disputes, which in return influence how those disputes are perceived. This reflects the sometimes-emotive nature of tax politics but also suggests that framing grievances in tax terms helps them to be taken seriously. Thirdly, legislators, judges and others often show a special sensitivity to the integrity of revenues that is consistent with their importance to the maintenance of state capacity. It may be going too far to describe this as a bias in the law, but there are certainly instances described throughout the book where the public interest in reliable revenues is conspicuously well-protected. Fourthly, the global environment within which revenues are raised is changing rapidly, threatening established tax bases and bringing into question the ability of states to survive in their current form.
The approach of this book may be broadly consistent with our intuitions, yet the organisation of topics by reference to constitutional law is highly unusual in a book on UK taxation. It is therefore hoped that this book will provide a helpful complement to volumes covering more familiar topics such as the structure of income taxation.5 The conclusions are also intended to begin, rather than to close, a line of enquiry, and as such have an interim quality. In particular, there would be value in testing the idea of a tax influence on the constitution by reference to detailed empirical evidence, whilst for reasons of clarity and scope the reliance here is almost exclusively on legal and other published materials. It is also argued below that the absence of a canonical constitutional document in the UK belies important commonalities with the issues faced by other jurisdictions. Given that constitutional debates in the UK are relatively uncontained by textual particularities, it is quite possible that non-UK readers will disagree with me as to what counts as âconstitutionalâ yet recognise many of the substantive issues. The potential for future comparative work here is both obvious and exciting.
The structure of the book is self-explanatory. The remaining sections of this chapter defend the premise of looking at taxation from a constitutional perspective and review the relevant literature, looking in turn at the public law and constitutional elements of taxation; state-building; the UK constitution; normative approaches to constitutions; and the approaches taken to the case studies in chapters two to five. Those chapters look respectively at tax devolution within the UK; the institutions for tax reform and legislative scrutiny in Westminster; taxpayer protection; and the position of EU and international tax law within the domestic constitution. It is not claimed that these are the only topics that could have been investigated and no attempt has been made to provide a comprehensive, textbook-style description of the law. The aim has instead been to enlighten the main themes of the book by reference to a wide range of constitutional topics, and with an emphasis on those that are particularly important at the time of writing. Chapter six concludes and makes some further comments on the relevance of state-building considerations to the twenty-first century UK.
II.Tax as Public Law
To many people approaching the subject for the first time, tax law presents a frightening prospect of abstruse technicalities, statutory detail and underlying principles distorted out of all recognition by decades of cat-and-mouse games between tax avoiders and tax policymakers. As is sometimes the case with stereotypes, there is a grain of truth here, but what is easily missed is that tax law plays a part in the wider sweep of history, politics and constitution-building. As recently as 2012, the leading textbook in the field was able to claim that:
Although the power to tax has been at the very centre of some of our major constitutional law disputes, including the execution of a King, there is a lack of engagement with public law issues.6
The 2019 edition of the same textbook clarifies that âuntil relatively recent times there has been a lack of engagement âŠâ.7 However recent this development may be, the tax literature already examines a rich variety of public law issues, including the following:
âąthe application of administrative law doctrines to tax problems, including the case-law on taxpayersâ legitimate expectations and the extra-statutory concessions of tax authorities;8
âąthe institutions of government involved with the creation and administration of tax;9
âąthe application of underlying public law principles such as the rule of law to taxation;10
âąthe relative importance and roles of tax law, political ideology and economic planning;11
âąthe wider significance of tax for society, including the construction of social roles based on gender, race, sexual orientation, social class and otherwise;12
âąthe role of tax law in the context of globalisation and the emergence of transnational law.13
These developments in the literature are exciting and raise some serious questions about the nature of tax law as a scholarly discipline. The first and perhaps most important point is that we should not necessarily assume that the objective of tax law is to raise revenues and then evaluate legal rules by reference to their success in achieving this objective in a rational and internally consistent manner. What if tax law in fact has more than one purpose, or many purposes?14 In this case, the rules needed to implement these various purposes might look very different, and apparent irrationalities in the rules might not reflect poor design so much as underlying disagreements about what a tax system should seek to achieve in the first place.15 This contingency of legal rules on political disputes around the relevant underlying purposes is a feature of public law...