Source · Select Committees · Treasury Committee
Recommendation 1
1
Accepted
Paragraph: 8
Complexity of the tax system exacerbated by the ever-expanding suite of tax reliefs.
Conclusion
The tax system is too complicated. The huge and seemingly ever-expanding suite of tax reliefs is an important factor in that complexity. We welcome, and will monitor, the Treasury’s commitment to simplifying the tax system. That simplification cannot merely focus on proposed new policies.
Government Response Summary
The government affirms its existing commitment to simplifying the tax system, with the Chancellor taking personal responsibility and a mandate for officials to focus on both new and existing rules, stating that most reliefs work well and reviews are already underway where needed.
Paragraph Reference:
8
Government Response
Accepted
HM Government
Accepted
The Government is already committed to simplifying the tax system and keeps all tax reliefs under review. In March, the Chancellor set out to the Treasury Committee his commitment to simplifying the tax system, and that he is taking personal responsibility for this work. The Chancellor has set a clear mandate to his officials to focus both on the simplicity of new tax policy design and on simplifying the existing tax rules and administration, asking for tax simplification to be considered ahead of every fiscal event. The Government therefore welcomes the Committee’s intention to monitor this but considers that most tax reliefs work well—in many cases specifically making tax simpler for citizens and businesses, and where issues exist review is already underway (e.g. Research and Development Tax Credits). The Government does not therefore feel a review of the kind recommended by the Committee would be an effective use of limited resources. While simplification is one of the Government’s key objectives, it needs to be balanced against other important objectives of tax reliefs, such as supporting growth and employment. A full review of all tax reliefs would impose significant uncertainty on the tax system, putting revenue at risk and altering business behaviour whilst they waited for such a review to conclude. It is worth noting that previous NAO and PAC reports on reliefs have focused on non-structural reliefs which are primarily designed to support government economic and social policy. Constant reviews would essentially be creating uncertainty for taxpayers, particularly for those industries which benefit from such reliefs such as Full Expensing, the Annual Investment Allowance, R&D Tax Credits, Draught Relief, Film Tax Relief, Video Game Relief and Theatre Tax Relief. Any sudden ambiguity around the operation of the reliefs, due to a widescale review, would unlikely be welcomed by the manufacturing sector, hospitality sector, the creative industries and many other sectors which utilise vital government reliefs.