Source · Select Committees · Treasury Committee
Recommendation 3
3
Acknowledged
Paragraph: 25
Lack of adequate data and scrutiny for tax reliefs hinders policymaking and accountability.
Conclusion
Tax reliefs account for considerable reduction in tax revenue. They require adequate data to be collected and published to inform proper policymaking or accountability. However, the evidence shows that this is not happening. The disparity between scrutiny of tax reliefs and that of equivalent direct public expenditure is stark.
Government Response Summary
The government agrees on the importance of collecting and publishing data on tax reliefs, stating that HMRC already provides extensive costings and evaluations. It commits to expanding these where possible, while also explaining limitations regarding structural reliefs and taxpayer burdens.
Paragraph Reference:
25
Government Response
Acknowledged
HM Government
Acknowledged
The Government shares the Committee’s view that collection and publication of data on tax reliefs, particularly non-structural reliefs, is essential to inform proper policy making and accountability. HMRC already publishes an extensive range of costings and impact evaluations for tax reliefs and will look to expand on these wherever possible without adding significant new reporting burdens on businesses and individuals that would be disproportionate to any benefits that might arise. The majority of reliefs (841 of 1,180) are structural—establishing the scope/base of a tax (e.g. income tax personal allowance)—meaning many specifically keep individuals and businesses out of tax. Such reliefs are generally neither controversial or problematic. HMRC publishes detailed annual commentary on the most significant non-structural reliefs (those that cost over £500m a year). This includes: • Distributional analysis for 30 of the 36 largest reliefs, where data is available; • Cost trends over time for 12 of the 36 largest reliefs where the original forecasts overlapped with the period considered by the release. If these costs varied from forecasts, HMRC also explains why. For most reliefs where HMRC does not currently publish an estimated cost, the information required to do so is not available. In large part, this is because many reliefs are specifically designed so that people who do not owe any tax are not required to engage with the tax system to claim the relief. Reversing this position to obtain the information required to estimate cost would place considerable additional new burdens on businesses and individuals that the Government does not feel proportionate or warranted, and would increase complexity in the tax system. Greater evaluation of structural reliefs would offer limited benefits to justify the additional burdens on taxpayers. For non-structural reliefs (those with a specific behavioural policy aim) HMRC has made significant progress in publishing data on estimated costs, investigating 301 and publishing costings for 252. Of the remainder, costings for 22 reliefs could not be published as data is not available, while publishing data for 27 would be disclosive of the affairs of identifiable taxpayers.