Charities have been urged not to submit “wild ideas” to the NCVO charity tax commission’s call for evidence, which is due to launch this month.
At the all-party parliamentary group on charities and volunteering, convened by NCVO, last night, Sir Nicholas Montagu, chair of the commission, warned charities against suggesting any changes to the tax system that had “a big price tag” in terms of public spending.
Montagu, who chaired the Inland Revenue between 1997 and 2004, said since his time there “government announcements about fiscal policy have rather lacked a long-term vision for the sector and we hope that our work might help to inform such a vision”.
“At the same time, I’m very keen that we should approach it in a realistic way. We are looking for realistic evidence, not evidence that implies a sudden splurge in new public spending for the sector,” he added.
He mentioned the principle of fiscal neutrality, which drew some concern from delegates that he meant there was no flexibility for savings to be made for the charity sector.
Montagu elaborated: “In other words, don’t come up with wild ideas which however desirable have a big price tag. If it is increasing costs around the margin, that’s certainly not something that we want to be silly and bureaucratic about.
“But we want people to think in terms of ‘if it’s got a price tag how might it be balanced’. And we want people to think creatively about this. Could it be balanced by a reduction in administration costs or whatever.”
He said the commission is due to open its call for evidence later this month, which will run for 16 weeks, but said he didn’t want to receive “great reams” of it, preferring shorter submissions.
Montagu also admitted he knew “nothing about tax”, despite his former role.
He said: “I need, as I did when NCVO asked me to chair the Commission, to dispel one possible illusion, which is that having headed the Inland Revenue from 1997 to 2004 that I know anything about tax.
“I went there in 1997 knowing nothing about tax and I left there in 2004 still knowing nothing about tax.”
He added that his role at the Inland Revenue was "to run the place and have a high level understanding of tax administration".
John Hemming, chair of the Charity Tax Group, suggested a quite drastic change to the charity tax system surrounding corporation tax that he hoped the review might consider.
He said: “How about flipping the whole tax system on its head and giving charities total exemption and only taxes by exemption.
“If there is a source of income or something that the revenue or government policy feels that charities should pay tax on, then legislate specifically for that. But give charities the benefit of the doubt in the meantime that all the income they receive is tax exempt.”
Preferred candidate to be the next Charity Commission chair Baroness Stowell of Beeston made a short speech at the meeting.
She said she would be “in listening mode, wanting to meet as many people, wanting to learn about the sector and the sort of issues people are concerned about and discussing” over the next few weeks before her official appointment.
Stowell is expected to be confirmed as the new chair on 20 February and she said “all being well I should be in post from 26 February”.