Source · Select Committees · Public Accounts Committee
Recommendation 21
21
Government’s published estimates of the costs of tax reliefs are prepared by HMRC and scrutinised...
Conclusion
Government’s published estimates of the costs of tax reliefs are prepared by HMRC and scrutinised by the Office for Budget Responsibility (OBR) in its role as the government’s official forecaster. Higher costs can indicate that a tax relief is working well or that it is not being used as intended.39 In 2014, we concluded that departments did not keep Parliament adequately informed of changes to the costs of tax reliefs. We also found that there was no feedback mechanism to alert Parliament if the actual cost of tax reliefs varied from HM Treasury’s forecasts, on which Parliament had based its approval of the relief. We said that in the future we would look at what the exchequer departments had done to provide proportionate feedback and analysis to Parliament each year on the costs of principal tax reliefs (those costing more than £50 million annually), including significant changes in costs.40 In their response, the exchequer departments said that the government was transparent about both the costs of existing reliefs and the costs and likely impacts of new reliefs with, for example, HMRC annually publishing information on the Exchequer cost of existing tax reliefs.41
Government Response
Not Addressed
HM Government
Not Addressed
4.1 The Government agrees with the Committee’s recommendation. Target implementation date: Autumn 2020 4.2 HMRC’s annual official statistics on tax reliefs include graphs of the absolute costs of the most significant reliefs and their cost as a proportion of GDP, which allows for monitoring the cost trends over time and whether cost changes are proportionate to the size of the relief. In the 2020 statistics HMRC will expand commentary on the variance over time of the costs of these high priority non-structural tax reliefs. 4.3 HMRC also plans to publish more information on initial forecast estimates in the tax relief statistics, starting in October 2020. In the first instance, this will focus on high priority non-structural tax reliefs which have been announced since the introduction of the Office for Budget Responsibility (OBR). The NAO noted in their recent report on tax reliefs, that it is more difficult to compare the costs of established tax reliefs with published government forecasts because projections cover a maximum of five years. There may be cases where it is not feasible to make credible comparisons, due to differences in time periods covered by the original forecasts and difficulties factoring in other complexities such as economic changes and wider policy changes. In cases where it is not feasible to develop an approach to compare costs with forecasts for high priority non-structural tax reliefs, HMRC will explain why.