Source · Select Committees · Public Accounts Committee
Recommendation 24
24
We asked HMRC and HM Treasury what action they took to follow up on cost...
Conclusion
We asked HMRC and HM Treasury what action they took to follow up on cost forecasts and understand the actual costs of new tax reliefs. HM Treasury told us that there was a variety of reasons why the cost of a tax relief might be different to what was expected and that it kept the cost of reliefs under review. HMRC similarly asserted that it based its forecasts on modelling using the best evidence it had available but that unexpected changes, such as in exchange rates, could occur that could result in significant variances. HMRC confirmed that it was committed to increasing the transparency of the information it made available on costs and in its autumn 2020 statistical bulletin it would start including explanations for how costs compare to original forecasts.44
Government Response
Not Addressed
HM Government
Not Addressed
4: PAC conclusion: HMRC cannot explain why the cost of some tax reliefs is considerably greater than government forecasts presented to Parliament. 4: PAC recommendation: HMRC should, as part of its next annual statistical publication on tax reliefs due in October 2020, identify all significant cost variances within tax reliefs, and report the reasons for those variances, explaining whether variations in cost are proportionate to the impact of the relief. 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.