Lost in translation
Value Added Tax
I had been planning to take December off. Sadly, the guest blogger I had lined up had last minute Christmas stuff to do and now here I am unexpectedly back at the creative coal face. (And, before you ask, no, the guest blogger wasn’t Santa.) Grasping at the blogging equivalent of low-hanging fruit, I wondered ‘Is there anything tax-related about Christmas?’ Well, yes there is peeps and I’m going to enlighten you.
The King James Bible records that it was the decree of Caesar Augustus ‘that all the world should be taxed’ that led to Mary and Joseph making the journey to Bethlehem. It seems that this may be a bit of a mistranslation as the Greek verb used (‘apographo’) means to enrol, record or register, for example, as part of a census, rather than to tax, although a census would have been part of the process of assessing taxes.
Mistranslation and misinterpretation are not at all unusual in the tax field, particularly where, as in VAT, the law is based on EU principles and legal texts and where the languages of all 28 Member States are, in theory, of equal status. There are also cases of ‘incorrect transposition,’ as those silver-tongued Eurocrats of the EU Commission call it, when Member States pass inappropriate measures while purporting to fulfil their obligation to implement an EU directive.
According to the 2009 publication by the Centre for European Policy Studies ‘Policy-Making in the EU: Achievements, Challenges and Proposals for Reform’ there are three types of incorrect transposition:
- gold-plating (going further than the directive requires)
- double-banking (overlapping of national laws and the transposed directive)
- regulatory creep (overzealous enforcement or uncertainty in the status of the measure being implemented)
HMRC often go for all three but they are particularly fond of gold-plating. Nothing like a bit of tax bling, especially in the festive season, I suppose.
Where UK law transposes or should have transposed EU law the UK law is to be interpreted so far as possible to conform to and give proper effect to the relevant EU provision. This principle of statutory construction, intended as an aid to determining meaning where the legislation is unclear or ambiguous, was, in my view, taken way too far by the First-tier Tribunal in the recent case of Rapid Sequence Ltd.
UK law (in Group 7, Schedule 9, VATA) exempts from VAT the ‘provision of a deputy for a person registered in the register of medical practitioners’ and this is completely inconsistent with the EU law which should have been transposed by that provision. The First-tier Tribunal, under the guise of giving the UK provision a ‘conforming construction,’ read words into it so that the result was that only the ‘provision of medical care services provided by a deputy for a person registered in the register of medical practitioners’ benefitted from exemption. To justify its appalling hubris the tribunal said:
‘If a provision of national law is inconsistent with the principles of a Directive it must, so far as possible, be interpreted in the light of the Directive and so as to be consistent with EU law, unless it is clear that Parliament specifically intended to depart from the Directive. This may involve a substantial departure from the language used although not from the fundamental or cardinal features of the legislation. It is possible to read the legislation up (expansively) or down (restrictively) or to read words into the legislation.’
Well ‘Bah, humbug’ I say. The plain wording of the UK provision was clear (although HMRC preferred to refer to it as ‘unfortunate’ and ‘problematic’) so how could the tribunal conclude that Parliament didn’t mean what it said? If HMRC didn’t like the provision as it was they could seek to amend it. It was their unfortunate and problematic drafting after all.
The Commission monitors how EU law is transposed and takes action where it considers that Member States have not transposed directives properly. In a Commission Report published in 2013 which shows the position at December 2012 the UK came tenth in the league table of Member States against whom the Commission had opened cases for late or incorrect transposition. Of course Italy came top.
The smell of turkey curry is hanging in the air like napalm so it’s time to put my Christmas jumper back on and pull that final cracker:
‘What’s the difference between a female lawyer and a pitbull?’
Happy New Year.
Tax lawyer specialising in business tax, SDLT and VAT