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This chapter discusses a case study of the UK's Inland Revenue's (IR) IT outsourcing arrangement with US-based supplier EDS. The case study reveals a complicated set of issues being managed through a strategic relationship in a difficult public service context. The case raises the issue whether the UK public sector environment in the early and mid-1990s was actually appropriate for anything other than relatively short-term contracts on a selective basis. At the IR it became clear that volatility in government policy added a high-risk project to an already complicated large-scale outsourcing arrangement in ‘start-up’ mode. The fact that this cut across attempts to develop several major new systems using new technologies that the supplier as well as the in-house IT staff were not clear on, only heightened the uncertainty, risks, and difficulties for developing a relationship. However, the high-profile nature of the deal, and the importance of the IR as the tax raising department for the government has probably served to counterbalance many of the uncertainties that would not be so easily offset in other strategic partnering cases.

This chapter focuses on the continuation of Hong Kong's remarkable growth from 1981 to 1997. In 1981, it was already an internationally important trading and financial centre, but by the time it was returned to Chinese rule in 1997, it was one of the richest cities in the world. The chapter also explains why the colonial government abandoned its original goal of a normal income tax and how, having given up on the possibility of structural reform, it turned its attention instead to the amendment of the schedular system in the Inland Revenue Ordinance.

This chapter discusses post-war developments in Hong Kong's system of income taxation as shaped by Sir Mark Young and Sir Alexander Grantham. Young's term in office was marked by his attempt to introduce a normal income tax, resulting in the Inland Revenue Ordinance 1947, which resurrected, in a modified form, the “partial income tax” provided for by the War Revenue Ordinance 1941. Shortly after the Ordinance became law in May 1947, however, he retired and so it fell to Grantham to pursue the goal of a normal income tax. However, the public record suggests that Grantham was reluctant to do anything which would antagonise Hong Kong's business community and that his prevarications effectively transformed the supposedly temporary Ordinance into a permanent feature of Hong Kong's tax system.

This chapter examines Sir Arthur Clarke's term as Financial Secretary and the works of the First Review Committee. Clarke had arrived in the Colony in 1930 and served as Commissioner of War Taxation in 1940 and 1941. After the war, he was promoted to Deputy Financial Secretary under Follows and secured the top job when Follows retired at the end of 1951. In 1952, Governor Alexander Grantham established the First Inland Revenue Ordinance Review Committee to review the Inland Revenue Ordinance. Clarke served as the Committee's chairman, but as will be seen, its terms of reference forbade it to consider the possibility that Hong Kong should have a normal income tax, or that the schedular taxes should be extended to cover offshore income.

This chapter discusses the factors which contributed to the failure of the restructuring of the colonial tax system in Hong Kong. First, the yield of the Inland Revenue Ordinance 1947 was greater than the government had expected and speedily paid off its alleged debt to Britain and went on to accumulate enormous reserves. Secondly, the British government did not insist on the establishment of a normal income tax. Thirdly, Hong Kong's business interests continued to oppose reform and the Chinese business community remained unrelentingly hostile to anything resembling a normal income tax. Lastly, Sir Alexander Grantham, who succeeded Sir Mark Young as Governor in 1947 and served until 1957, also opposed reform and made no attempt to carry out London's instructions. This may be due to the well-known phenomenon of colonial Governors “going native”, and identifying with “their” colonies' interests rather than Britain's.

This chapter focuses on Hong Kong's tax system in the 1970s. Murray Maclehose and Philip Haddon-Cave were the two key figures in the colonial administration in the 1970s. In 1976, Maclehose established a committee to review the tax system—the Third Inland Revenue Ordinance Review Committee. Unlike the First and Second Committees, the Third was intended to review the basic structure of the tax system; and unlike their predecessors, Maclehose and Haddon-Cave committed themselves to a highly visible campaign to institute reform. Ultimately, however, this campaign came to very little: the system's basic schedular structure remained intact; offshore profits remained untaxed, whether attributable to an offshore branch or not; and the plan to introduce a tax on dividends was abandoned. In all three respects, the Ordinance remains unchanged today.

This chapter focuses on the British Handover of Hong Kong to China. On 30 June 1997, Hong Kong ceased to be a British colony and became a Special Administrative Region (SAR) of the People's Republic of China. This transition entailed no change in the territory's tax system. The Inland Revenue Ordinance, like almost all the legislation left behind by the colonial regime, remained in force. China promised that Hong Kong would enjoy a high degree of autonomy and that the structure of its government would remain unchanged. More particularly, China made it clear that there still would be a complete separation between Hong Kong's tax system and public finances.

This chapter presents a cross-case analysis of the case studies discussed in Chapters 3–7. A cross-case analysis provides further insights into the relevance and strength of factors in any causal scheme — something of which the analytical frameworks could only provide limited prior understandings. This process also enables a further testing of the relevance, and a potential deepening, of the analytical frameworks themselves and the insights they can bring to bear in future studies of the phenomena. Three patterns emerge that characterize relationship arrangements as inefficient, adequate, or efficient. Xerox, British Aerospace, and Inland Revenue's arrangements were found generally to be inefficient in the first few years, raising serious doubts over whether the relationship arrangements offered operational advantages or benefits over the previous in-house operations. Subsequently, all three sets of arrangements were improved to a more than adequate level. BPX's arrangements described an overall adequate arrangement in terms of relational efficiency, even though the Alliance approach generally proved operationally ineffective. Finally, after a bad start, ESSO's arrangement showed the nearest to what could be termed relationally efficient, although certain practices (e.g. contract renewal) do introduce considerable transaction costs. The ideal scenario in terms of efficiency would be low results on all three accounts.

The system of taxation provided for by the Inland Revenue Ordinance has been extraordinarily successful. It has almost always, together with the other sources of public revenue, produced more money than the government has wanted to spend. More importantly, the Hong Kong people seem curiously content with the combination of very low spending and very light taxes. One answer, therefore, to the question “Where to go from here?” is, “If it ain't broke, don't fix it.” In other words, one conclusion to be drawn from the Hong Kong tax system's extraordinary record of success is that reform is neither required nor desirable.

This chapter examines the boundary that lies between the judicial doctrine expounded in Ramsay and the traditional English law view of sham. It discusses sham transactions and tax avoidance schemes; acquiring and disposing of securities for tax advantage; and the relevance of ‘intention’. It suggests that UK courts have preferred the approach set out in WT Ramsay Ltd v Inland Revenue Commissioners to the sham doctrine because the Ramsay approach does not depend upon the need to deny the agreements upon which the taxpayer relied.

This chapter examines developments in social security policy in 2005. It discusses the continuation of the government's primary focus on reducing poverty through paid work, supplemented with means-tested benefits in the form of tax credits. It notes that these cover an increasingly wide range of those in low-paid work, following the extension of the working tax credit to those without children. It identifies the greatly extended role of Her Majesty's Revenue and Customs (HMRC) in delivering social security in the form of tax credits, as a significant development in social security policy. It involves extending the department's role to one of distributing income as well as collecting revenue, and in the process dealing with a significantly poorer population with different needs and expectations than the traditional client base of the Inland Revenue.

This chapter is the concluding chapter of Income distribution and social change: A study in criticism. It begins with a comment in the Annual Report of the Board of Inland Revenue for 1948–49, that there had been ‘a very considerable redistribution in incomes’ (BIR, 1950, pp 82–8). It opines that the comment is particularly significant, providing official confirmation of the prevalent assumption of growing equality which is reinforced by economic studies which Titmuss also criticized. It notes that these created a climate for policy discussion in many areas, particularly taxation, and helped set the agenda on a range of issues. It notes that Titmuss emphasised ‘that data are a product, not an uncovering’ and provided a detailed and unrelenting critique of the use of ‘routine administrative statistics’ to provide the nation's account of patterns and trends in income distribution.

This chapter examines the relevance of the sham doctrine in cases dealing with company charges. It argues that if sham plays any role in determining whether a company charge is fixed or floating, it is in the first stage of the test set out by Lord Millet in Agnew v Commissioner of Inland Revenue, where a court must ascertain the nature of the rights and obligations which the parties intended when creating the charge.