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New Welsh Bill dilutes Senedd control over taxes, argues Professor

18 January 2022

A new law will give the Welsh Government powers to change tax legislation with reduced Senedd scrutiny, a leading academic has warned.

In an article published as an extended blogpost by Cardiff University’s Wales Governance Centre, Professor Emyr Lewis of Aberystwyth University argues that the Welsh Tax Acts (Power to Modify) Bill “raises some fundamental questions about constitutional power, the rule of law and democracy in Wales”.

The Bill will give the Welsh Ministers ‘Henry VIII’ powers to modify the three existing Welsh Tax Acts which cover the tax collection framework, the Land Transaction Tax (LTT) and Landfill Disposals Tax (LDT). Professor Lewis explains that originally the Government proposed being a far wider law-changing power.  In the Bill the scope of the power has been narrowed. At the same time the Bill has removed what was called a ‘Senedd lock’ where the power to change the Acts could only be used with the prior authorisation of the Welsh Parliament.

The Bill specifies four limited circumstances where the Henry VIII powers could be used. These are:

  • ensuring that LTT or LDT is not imposed where to do so would be incompatible with any international obligations;
  • protecting against tax avoidance in relation to LTT or LDT;
  • responding to a change to a predecessor tax that affects, or may affect, the amounts paid into the Welsh Consolidated Fund under section 118(1) of the Government of 15 Wales Act 2006;
  • responding to a decision of a court or tribunal that affects, or may affect, the operation of any of the Welsh Tax Acts or regulations made under any of those Acts.

But Professor Lewis argues that even in those circumstances, the Senedd’s prior authorisation for use of the power should be required as a matter of constitutional principle in most if not all cases. He further notes that the broad power in the Bill which enables the Welsh Ministers to make regulations with retrospective effect poses challenges to legal certainty and the rule of law.

The article concludes that the Bill needs to ‘get the balance right’ between executive and legislature, and calls for safeguards to be introduced in order to restore the primacy of the Senedd and guard against unintended expansion of executive power. Those safeguards could include the reintroduction of the ‘Senedd lock’ in all or most cases, a narrower and more restricted drafting of two of the purposes for which the government is seeking powers, and legally binding limits on the government’s ability to legislate retrospectively.

Professor Emyr Lewis commented:

“The Bill would give the Welsh Government far-reaching so-called Henry VIII powers in relation to the four purposes that have been set out. Two of those purposes are closely defined and present less difficulty, namely ensuring that Welsh law is in accordance with international law and enabling Welsh taxes to keep step with UK taxes in order to ensure that Wales’ block grant from the UK Treasury is not artificially affected. The problem with the other two purposes lies largely in how broadly they have been drafted, which could have the effect of giving the executive too much power to change tax law without the upfront scrutiny of the Senedd.

“There should be particular concern over the anti-avoidance purpose for which the Welsh Government is seeking power to make retrospective regulations. The scope of the purpose as drafted is very broad and potentially encroaches on territory which may be regarded as more properly that of the Senedd than of the Government.

“The breadth of the purposes as drafted suggests that they may be being sought as ‘just in case’ powers, which goes against the grain of the apparent principle that it is the representatives of the people rather than those of the Crown who decide whether and to what extent people should be taxed.

“As more fully outlined in my article, these concerns could be addressed by tightening the drafting of the Bill and by respecting the primacy of the Senedd over devolved tax legislation.”

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