The Welsh Tax Acts etc. (Power to Modify) Bill was introduced in the Senedd on 13 December 2021 by Rebecca Evans MS, the Minister for Finance and Local Government.
- allowed the Welsh Ministers to make regulations with retrospective effect;
- allowed the Welsh Ministers to change existing regulation-making powers in the Welsh Tax Acts; and
- did not provide for a minimum time period for Senedd scrutiny of regulations.
This led to amendments being made to the Bill at Stage 2 to provide safeguards and seek to ensure the powers are used responsibly.
On 5 July 2022, the Senedd will debate and vote on proposed Stage 3 amendments. You can watch the debate live on Senedd TV.
What does the Bill do?
The Bill proposes to give the Welsh Ministers a new regulation-making power to amend three Welsh Tax Acts:
- Tax Collection and Management (Wales) Act 2016
- Land Transaction Tax and Anti-avoidance of Devolved Taxes (Wales) Act 2017
- Landfill Disposals Tax (Wales) Act 2017.
The power conferred in the Bill would be used to make urgent changes to the Welsh Tax Acts in response to four scenarios:
- to ensure the devolved Welsh taxes comply with any international obligations;
- to protect against tax avoidance in relation to devolved Welsh taxes;
- to respond to changes made by the UK government to ‘predecessor’ UK taxes (ones where Wales has an equivalent devolved tax) which affect, or may affect, the amount paid into the Welsh Consolidated Fund;
- to respond to decisions of the courts and tribunals which affect, or may affect, the operation of the Welsh Tax Acts, or any regulations made under them.
The Senedd Research Bill Summary provides additional information about the Bill.
What changes were made during Stage 2?
Stage 2 consideration of the Bill took place in Finance Committee on 9 June 2022, which led to changes being made to the Bill. The amendments include:
This amendment inserts a new restriction, which prevents regulations made by the Welsh Ministers that have a retrospective effect from applying from a date further back than the date the legislative change was warned or announced, either by a ministerial oral or written statement.
The Minister noted:
The restriction will only apply in cases where there is a negative tax impact. That is, where there is any new liability or increased liability to land transaction tax or landfill disposals tax on a taxpayer.
The restriction does not extend to situations where the Welsh Ministers use the power to make changes with retrospective effect that reduce the tax charged, and therefore that have a positive effect for the taxpayer.
The Minister commented that “this is so that changes can be made to legislation to reduce taxpayers' liabilities to a date before the announcement”.
This amendment prohibits the Welsh Ministers from using the power within section 1 of the Bill to make any provision relating to the investigation of criminal offences.
It also restricts the Welsh Ministers' ability to amend the existing procedures for making regulations in the Welsh Tax Acts, and any future regulation-making procedures to be introduced into the Welsh Tax Acts.
The Welsh Government would need to use the made affirmative procedure for regulations when changes are needed to have effect immediately or shortly thereafter. Made affirmative regulations will have provisional effect and must receive approval within a maximum period of 60 Senedd days to become permanent.
The regulations laid before the Senedd using the power within section 1 of the Bill, and subject to the made affirmative procedure, must be laid for a minimum period of 28 days before they are voted upon by the Senedd.
The Minister commented:
This amendment is to provide sufficient time for the Senedd to scrutinise regulations before the motion to approve is heard and voted upon.
The amendment limits the lifespan of the power provided by section 1 of the Bill. It sets out that the regulation-making power within section 1 will expire five years after the Act comes into force, around September 2027. Regulations made before the expiry of the power will remain valid.
This amendment also provides the next Senedd with the opportunity to extend the life of the regulation-making power by up to a further five years.
The Minister explained:
That extension is a once-only opportunity; it will not be a rolling renewal and is intended to permit that Senedd to ensure, if they wish, that the longer term arrangements are fully in place before removing the flexibility provided by this Bill.
This amendment addresses the recommendation of both the Finance and LJC Committees that a duty should be placed on the Welsh Ministers to publish the conclusions of a review on the operation and effect of the Act.
It inserts a new section on this review, which must be completed no later than four years after the Act comes into force. The Minister noted:
The timing of this review is intended to ensure that enough time has passed to make the review meaningful, but also so that the outcome of the review will be able to inform the development of the future architecture early in the next Senedd term.
The Welsh Government published a revised Explanatory Memorandum on 28 June 2022 to incorporate the Stage 2 amendments. It also published an updated draft of the policy statement on the Welsh Ministers' approach to the making of regulations which have retrospective effect.
Article by Christian Tipples, Senedd Research, Welsh Parliament