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Research carried out at the University of Exeter Business School (UoEBS) into the design of fiscally decentralized institutions has been instrumental in bringing `vertical fiscal externalities' (an inherent feature of multi-level governments), and the resulting inefficiencies, to the attention of international organizations including the International Monetary Fund (IMF), the World Bank, the Organisation for Economic Co-operation and Development (OECD) and governments worldwide. This work has informed policy decisions and provided awareness of the intrinsic issues and interdependencies between tax decisions at different levels of government through the production of significant theoretical, empirical, and policy literature, and has directly influenced taxation policy directly through changes in fiscal legislation in Germany.
Professors Kimberley Scharf and Benjamin Lockwood have influenced public and policy debate leading to tax policy changes in the UK and EU. Scharf estimated the impact of proposed reforms to the UK Gift Aid program, research that improved public understanding, led to the creation of an open discussion forum for affected parties, and shaped NGO/charity campaigns. Lockwood estimated the tax effects of removing VAT exemption from firms offering financial services in the EU. The methods developed were adopted by EU analysts and underpinned EU estimates of the tax advantages enjoyed by the sector, leading to the 2011-12 imposition of a Financial Transactions Tax within 11 EU member states from 2014.
Research at LSE by Henrik Kleven and colleagues has significantly improved the design of tax policy and tax enforcement in countries as different as Pakistan and Denmark. These policy impacts can be summarised as follows:
This case study describes how an economic and statistical analysis of tax policy undertaken by Chris Heady has been used to inform fiscal policy decisions, both in the UK and overseas.
The research has had a direct impact on public policy, informing HM Treasury's decision in 2011 to increase the main rate of value added tax and accelerate the reduction in the rate of corporation tax. It has also had a broader impact through contributing to the government's understanding of the role of tax policy in promoting growth, and through informing public understanding of the issue.
In addition to its significance to UK public policy, the research has had international reach as it has been presented for discussion by the international tax community and international organisations.
Vaughan Williams demonstrated the benefits to consumers, betting operators and government of switching from a tax regime based on turnover to a gross profits tax (GPT). Applied initially by the UK Government to general betting (i.e. through bookmakers) and then to bingo and pools betting, GPT was extended in 2013 to gaming machines through a new machine games duty. HM Revenue and Customs used Vaughan Williams' elasticity estimates in setting the rate of machine games duty and to successfully challenge regulatory discrepancies relating to gaming machines and stake limits. Since 2011 other European countries have followed the UK's lead and switched to gambling taxation based on GPT.
The recommendations of the `Calman Commission' on Scottish Devolution resulted in the largest transfer of financial powers from Westminster since the creation of the United Kingdom, implemented in the Scotland Bill which received Royal Assent in 2012. The independent expert group chaired by Professor Anton Muscatelli were directly influenced by University of Glasgow research on the lack of accountability in the UK devolved system, the potential to extend the use of income taxation as a devolved tax, and the problems in devolving taxes such as VAT, corporation and natural resource tax.
Judith Freedman's research on tax law and policy helped shape anti-avoidance provisions of the Finance Act 2013. Freedman had proposed a statutory general anti-avoidance principle combined with a statutorily created administrative framework to limit the exercise of discretion by revenue authorities, thus reducing manipulation whilst achieving reasonable certainty in UK tax law. This research directly informed debates among tax professionals, officials and the public. The 2011 Aaronson study group (of which Freedman was a member), commissioned by the Exchequer Secretary, produced proposals embodying her approach. The government acted on these proposals in the Finance Act 2013, introducing into UK law an overriding statutory principle, to which other tax legislation is subject, together with an administrative framework (the General Anti- Abuse Rule (GAAR) Advisory Panel) in which consensus around the concept of tax avoidance can be pursued between the taxpaying community and revenue authorities. The new anti-avoidance approach informed via Freedman's research is now law throughout the UK, affecting every taxpayer.
The research carried out by Professor Richard Blundell transformed understanding of the responsiveness of labour supply to tax and welfare reform, and fundamentally changed the public debate about taxation. This was achieved most clearly through the Mirrlees Review of Tax Reform, co-authored by Professor Blundell, and through publications that provided the key scientific evidence behind the tax rate, tax credit and benefit integration proposals. These proposals had substantive impact on policy reform at home and abroad, ranging from public debate on the fundamental principles of taxation to immediate impact on tax and welfare reform legislation, such as the business case for the Universal Credit reform.
Professor Prem Sikka has become widely known in finance circles for his research on the `dark side' of the finance industry. His research on tax avoidance in particular has established him as an expert on the mechanisms by which companies find legal loopholes to avoid tax. As a result he has been asked to use his research to inform policy discussion in three main ways: by consulting with the UK Government's Secretary of State for Business Innovation and Skills; by informing politicians and parliamentary committees in Westminster, Scotland, and France; and by acting as a senior adviser to a number of NGOs concerned with the tax conduct of global corporations. In recognition of his contributions to public discourse he has been named by specialist publication Accountancy Age as one of the 50 most influential figures in UK finance.
Research by Geoff Whittam and Mike Danson at the University of the West of Scotland looked at the local effects of the Council Tax on poverty and inequality. Their work led to them proposing a new progressive model of `local' taxation called the Scottish Service Tax (SST). The research has been used by NGOs and other organisation to inform their own policy positions and campaigns for taxation reforms and poverty alleviation. The SST model has been cited extensively in submissions to enquiries and debates about Scottish local funding reforms. SST was adopted by the Scottish Socialist Party in 2002 which led to a Bill being put before the Scottish Parliament.