Panjandrum: while for most the word may bring to mind a particular kind of pompous and pretentious public servant, few remember it as the codename for one of the Second World War’s most bizarre experiments.
Designed by the British to breach German beach defences, the Grand Panjandrum was a behemoth of two rocket-propelled giant wheels joined by an explosive axle that would go off once it reached the concrete fortifications. Unsurprisingly, there was one problem: it was plainly unworkable. Each time it was tested, the rockets careened it wildly off course, exploding mere metres away from spectators. Sensibly fearing the Grand Panjandrum could end up blowing up Allied forces on the beaches, it was quietly shelved ahead of D-Day.
A 70 year old experiment may not seem the most apt of metaphors for the proposed reforms to business rates appeals that have caused such a headache for Theresa May in the last few months. But as with the ill-fated Panjandrum, there is a sense that not only can the proposed changes not work: they almost seem designed not to do so.
While the sharp shifts in rateable values drew the headlines, the big objection focused on the new rates appeal system – particularly the so-called “reasonable professional judgement” clause, which would have allowed appeals against incorrect valuations to be thrown out if they were within a margin of error. It was this point that rallied 17 trade bodies representing the length and breadth of the British economy, from pubs to shopping centres to corner shops, to oppose the government’s plans.
The government appeared to back down and withdraw the clause. But it has since announced it will be left to the Valuation Tribunal of England to interpret what is a reasonable assessment. The principle challenged by the professional bodies - that firms should not be forced to pay for an incorrect judgement on the basis that it is ‘close enough’ – has not changed.
The snap election has thrown everything into the air. But what is clear is that the Conservative government likely to be returned in June should take this opportunity to ditch the changes full stop.
We should bear in mind why changes to the appeals system are needed. Since coming under central government control in 1990, rates have slowly crept up under successive governments from around a third of rateable values to an effective 50% tax rate. Unsurprisingly, this has increased the number of appeals. Coupled with major cuts to the Valuation Office Agency’s budget each year since 2009 – 20% this year alone – the VOA now faces a backlog of over 300,000 appeals dating back to 2010. Put simply, the tax system is no longer fit for purpose.
Clearly, a streamlined and properly funded system is needed. Instead, the government seems to believe the problem of appeal backlogs can be resolved by making it near impossible to appeal to begin with.
The byzantine complexity the changes have brought is apparent. Not too long ago, all a ratepayer who wished to appeal had to do was sign and date a paper stating the address and the assessment of the subject property, not even needing to use an official form – in the memorable words of Lord Birkenhead, ratepayers could use the side of a cow if they so wished. It then fell to the Valuation Office to justify their assessment and the evidence on which it was based.
While a return to bovine bureaucracy probably wouldn’t do much for the efficiency of the VOA, the proposed Check Challenge Appeal reforms could hardly be any better. A one-stage appeal process has been replaced with three stages that each bog down applicants in a quagmire of red tape, waiting games, and the ever-present risk of being forced to start the appeal all over again from scratch.
Crucially, under CCA appellants must submit a fully argued case citing valuation evidence and relevant case law without knowing the evidence used by the VOA to come to their assessment decision – the equivalent of forcing a defendant to fight a trial without hearing the prosecution’s case.
Only after this can ratepayers finally lodge an appeal. And if the original valuation is deemed ‘reasonable’ by the tribunal – a term given no definition in the regulations – ratepayers could see their accurate appeals being thrown out after a several year appeals process.
These reforms fail to give ratepayers simplicity, clarity, or efficiency. They violate internationally established principles of tax justice. They don’t address the failings of the existing rates system. And worst, they go against opposition from ratepayers, practitioners, professional bodies, local authorities and virtually all involved parties. If someone wanted to undermine faith in a tax system, it is hard to think what they would do differently.
The starting point is simple: the government must guarantee that ratepayers will not lose out if their appeals are accurate. But beyond that, transparency must be at the heart of any new reforms. The government wants to reduce the number of appeals, but hiding the evidence underpinning the VOA’s decisions available will make appeals more likely, not less.
Taxpayers will always feel more hard done by a decision they don’t know the rationale behind. A better understanding of how assessments are decided will instil confidence in the rates system, rather than encourage appeals against valuation spikes.
As for the Grand Panjandrum, theories attempting to explain such a ludicrous weapon later proposed that it was a grand distraction all along, designed to trick the Germans into thinking the British had their sights set on Calais.
And while it may be a little far-fetched to suggest that the rates farrago is a modern-day distraction mechanism from the grand business of Brexit, we can only hope that these reforms too never see the light of day – or it really will be a case of economic friendly fire.
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