Source · Select Committees · Public Accounts Committee
Recommendation 23
23
We asked the exchequer departments whether reliefs costing double what HMRC had forecast meant that...
Conclusion
We asked the exchequer departments whether reliefs costing double what HMRC had forecast meant that they were out of control. They asserted that they could not anticipate everything when they made their forecasts. They outlined factors that could affect costs including shifts in science and technology, reliefs driving changes in behaviours and changes in the economic determinants which underpin forecasts, such as the level of investment. They also stated that variances between forecasts and actual costs can occur because of changes in the underlying tax rates.43 35 Committee of Public Accounts, Tax Reliefs, Third Report of Session 2014–15, HC 282, June 2014 36 HMRC, Estimated Costs of Tax Reliefs, October 2019 37 HMRC, Non-structural tax reliefs – Additional cost estimates, May 2020 38 C&AG’s report, paras 3.18 and 3.19 39 C&AG’s report, paras 2.16–2.17 40 Committee of Public Accounts, Tax Reliefs, Third Report of Session 2014–15, HC 282, June 2014 41 HM Treasury, Government responses on the Sixty First report (Session 2013–14) and the First to the Seventh reports from the Committee of Public Accounts: Session 2014–15 42 C&AG’s report, paras 2.17, 2.24, Figures 10 and 11 (2017–18 is latest year for which data are available) 43 Qq 28, 36, 39 Management of tax reliefs 15
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.