Retroactivity in Tax Legislation Philip Baker QC Grays Inn Tax Chambers Institute for Advanced Legal Studies, London University EATLP Leuven 28th May 2010

The Thesis Retroactive effect to the earlier pronouncement of a tax bill is no problem: no legitimate expectations of taxpayers are infringed Clarification: this is not legislating by press release – the final legislation is passed by Parliament. However, the legislation provides that it takes effect from an earlier announcement.

No infringement of Parliament’s authority Parliament still enacts the final legislation Parliament decides whether or not to give the legislation retrospective effect NOTE: to deny Parliament the possibility of giving retrospective effect restricts the sovereignty of Parliament

UK Practice (in a normal year) Ministerial statement to Parliament / Press release (sometimes) Budget Statement – c. mid-March Budget resolutions – may have immediate effect New tax year – 6 th April

UK Practice (in a normal year) Finance Bill publication, debates and amendments – April-June Royal Assent – early July Legislation may take effect from: – Earlier pronouncement – Budget day – Start of tax year – Royal Assent – Start of next tax year – An earlier date (true retrospection)

Reasons for public announcements Virtually all tax legislation has a behavioural impact – may be adverse impact – E.g. creating a false market Potential revenue loss in waiting for next Finance Act – E.g. closing a loophole Initiating public consultation Compare: family law; criminal law

No infringement of taxpayers’ rights No legitimate expectation that tax law will remain unchanged Public announcement removes any legitimate expectation that change will only be prospective No infringement of rule of law: temporal operation is fixed by legislation

No infringement of taxpayers’ rights Note: ECHR case law – ABCD v. UK (8531/79) – Building Societies (21319/93) – MA v. Finland (27793/95) – SB v. Finland (30289/96) – Joubert v. France (30345/05) – Di Belmonte v. Italy (72638/01) – exceptional circumstances where retrospective operation imposed an excessive burden on particular taxpayer

Retroactivity in Tax Legislation Philip Baker QC Grays Inn Tax Chambers Institute for Advanced Legal Studies, London University EATLP Leuven 28th May 2010