Tax is too complicated… say the legislators

By August 22, 2023LinkedIn
Photo of a man in a suit looking exasperated at his laptop

A parliamentary committee has been examining efforts to simplify tax, but progress is still a long way off.

Among other things, last year’s ill-fated ‘mini-Budget’ was notable for the swiftness with which Jeremy Hunt reversed most of the proposals it contained. The promise of reduced corporation tax and abolition of additional rate income tax went nowhere. However, a few of then-Chancellor Mr Kwarteng’s plans did survive and are now working their way into legislation.

One proposal that was spared Mr Hunt’s axe was the abolition of the Office of Tax Simplification (OTS). Mr Kwarteng’s justification was that “Instead of having a separate arms-length body oversee simplification, the government will embed tax simplification into the institutions of government.” In the March Budget, Mr Hunt followed this up with a statement that “…officials were given a clear mandate to focus on simplicity of tax policy design throughout the policy-making process and on simplifying existing tax rules and administration.”

Among others, the House of Commons Treasury Committee is unimpressed by the planned demise of the OTS. In a recent report, the Committee noted, “The Chancellor appears to agree with us that the tax system is overcomplicated and the trend of ever more complication must be reversed.” It suggests that “disbanding the independent champion for simpler tax risks signalling that simplification is not a priority for the government.”

The obvious danger is that the Treasury and HMRC will effectively end up marking their own homework, rather than having it subjected to external scrutiny. To reduce this danger, the Committee recommended the government should “report to the Treasury Committee annually on steps taken to simplify the tax system, covering both new and existing taxes.”

Whether that happens is a decision for the government, which in recent years has largely ignored the advice it has received from the OTS. In any event, HMRC appears to be anxious to reduce its direct contact with taxpayers. For example, it has announced the “trial” closure of its self-assessment helpline until 12 September.

The chances of tax becoming simpler any time soon look poor, which is another reminder of the importance of independent tax planning advice.

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