We have discussed before the difficulty of establishing what the intention of parliament was when introducing particular pieces of legislation. In normal circumstances this is hard enough, but what happens where legislation has to be tested in situations which, because of technological progress, can’t possibly have been envisaged at the time parliament enacted the legislation? In an era of rapid technological progress, this happens more often that you’d imagine. These thoughts were prompted by a recent report in an area which is outside my usual experience: bingo duty. Bingo duty is charged on payments ‘in respect of entitlement to participate in bingo’. That sounds simple enough. If a person pays for a bingo card which has numbers printed on, the payment for that card gives that person 'entitlement to participate' in a game of bingo. But modern technology has created alternatives.
The tax tribunal recently had to decide the correct treatment where a player doesn’t purchase a printed card, but instead hires an electronic device on which the numbers in each game are loaded electronically. Was the payment for the hire of the device ‘in respect of an entitlement to participate in bingo’? The upper tribunal thought not. Payment to load the data on the machine for each game was caught: but the payment for the hire itself was not. The machine was used to play the game as a modern equivalent of a pen used to mark off the numbers on the card. But a pen, just like the machine, did not itself give entitlement: it was simply a means to play. So bingo duty wasn’t charged on the hire costs.
Although the decision is important to the gaming industry, my interest is in the wider perspective. How does tax keep up with changes in technology?
Many well-publicised issues about avoidance in multinational groups stem from the fact that technology means that traditional concepts of where a company’s basis of operations for tax purposes are no longer relevant. Take a more down to earth example, before credit cards were widely available there was a tax charge where an employee was provided with a voucher which could be exchanged for goods or services. But credit cards are not exchanged, so the legislation had to be widened to include vouchers etc which were presented without being exchanged.
The tax system is full of such examples - indeed an archaeologist could probably trace the history of technological development simply by tracking changes in the tax system over the last century.
If you would like to discuss this further, please contact Andrew Hubbard.