In a new paper for the Institute for Government, Edward Troup, former Executive Chair and First Permanent Secretary at HMRC, reviews 12 years of the Office for Tax Simplification, concluding that it was ‘hamstrung from the outset’ and ‘doomed to failure’.
Troup argues that the remit of the OTS was never clear, given that ‘simplification’ was not precisely defined, and with the OTS having been established as an arm of the Treasury rather than as an external, independent body. The political decision to exclude the office from the Budget and Finance Bill process ‘left it with no ability to stem the flow of new complexity generated by successive budgets’.
Troup concludes: ‘A body established with lower – but more realistic – expectations of improving tax administration and ensuring that measures introduced achieve their objectives would make for a better functioning tax system. Taxpayers, HMRC – and future chancellors – would all benefit.’
Commenting on the report, John Barnett, chair of the CIOT’s Technical Policy and Oversight Committee, said:
‘We believe that the tax system benefited from having an independent body to pursue improvements in tax administration and technical aspects of tax legislation. OTS was doing well, but few of its recommendations were ultimately implemented … We believe that there should indeed be more comprehensive post-legislative scrutiny of taxes. A key part of the existing consultation process is “reviewing and evaluating the change”, but this rarely happens in practice. One issue to consider is how this can be done transparently while having access to all the relevant HMRC data.’
Helen Thorney, ATT Technical Officer, said: ‘We would be supportive of an independent body which included simplification of administrative aspects of taxation within its remit as it is often the actual process of navigating the tax system which provides the most difficulties for taxpayers.
‘The challenge for the OTS was that it operated too far downstream in the development of tax policy, only able to comment after policies had been designed, implemented and systems created. While the Government’s current proposals of asking HMRC to look at simplification means this should be considered earlier in policy development, we do not consider that in practice HMRC will have the necessary bandwidth to engage in simplification on its own. One of the benefits of the OTS was that as a separate body it was able to attract feedback from a wide range of people who were able to be open and honest about issues in a way which they may not feel like being with HMRC.’
In a separate development, Chancellor Jeremy Hunt sets out the government’s reasoning for closure of the OTS, in response to a request by the Treasury Committee. The chancellor sums up the rationale as follows: ‘By virtue of being an independent body of the Treasury the OTS was not always able to weigh up the competing, legitimate objectives and priorities for tax policy that Ministers take into consideration, including delivery, fairness, impact on business and individuals, and costs to taxpayers. It is right to ensure that simplicity of policy and administrative design is brought more directly into policy making in the Treasury and HMRC, with my close oversight, supported by the Financial Secretary.’
Hunt also signals that officials in the Treasury and HMRC have been asked to focus on simplicity in tax policy design, with new policy to undergo ‘increased scrutiny for simplicity of design and ease of customer journey’ with this work feeding into the advice provided to ministers ahead of fiscal events.
While such scrutiny may not have been applied to the current Finance Bill, a cross-party group of MPs, led by Harriett Baldwin (chair of the Treasury Committee) has put forward two amendments to the Bill. The first proposes reversing abolition of the OTS, while the second would require the Treasury to report annually on steps taken to simplify the tax system, in the absence of the OTS.
In a new paper for the Institute for Government, Edward Troup, former Executive Chair and First Permanent Secretary at HMRC, reviews 12 years of the Office for Tax Simplification, concluding that it was ‘hamstrung from the outset’ and ‘doomed to failure’.
Troup argues that the remit of the OTS was never clear, given that ‘simplification’ was not precisely defined, and with the OTS having been established as an arm of the Treasury rather than as an external, independent body. The political decision to exclude the office from the Budget and Finance Bill process ‘left it with no ability to stem the flow of new complexity generated by successive budgets’.
Troup concludes: ‘A body established with lower – but more realistic – expectations of improving tax administration and ensuring that measures introduced achieve their objectives would make for a better functioning tax system. Taxpayers, HMRC – and future chancellors – would all benefit.’
Commenting on the report, John Barnett, chair of the CIOT’s Technical Policy and Oversight Committee, said:
‘We believe that the tax system benefited from having an independent body to pursue improvements in tax administration and technical aspects of tax legislation. OTS was doing well, but few of its recommendations were ultimately implemented … We believe that there should indeed be more comprehensive post-legislative scrutiny of taxes. A key part of the existing consultation process is “reviewing and evaluating the change”, but this rarely happens in practice. One issue to consider is how this can be done transparently while having access to all the relevant HMRC data.’
Helen Thorney, ATT Technical Officer, said: ‘We would be supportive of an independent body which included simplification of administrative aspects of taxation within its remit as it is often the actual process of navigating the tax system which provides the most difficulties for taxpayers.
‘The challenge for the OTS was that it operated too far downstream in the development of tax policy, only able to comment after policies had been designed, implemented and systems created. While the Government’s current proposals of asking HMRC to look at simplification means this should be considered earlier in policy development, we do not consider that in practice HMRC will have the necessary bandwidth to engage in simplification on its own. One of the benefits of the OTS was that as a separate body it was able to attract feedback from a wide range of people who were able to be open and honest about issues in a way which they may not feel like being with HMRC.’
In a separate development, Chancellor Jeremy Hunt sets out the government’s reasoning for closure of the OTS, in response to a request by the Treasury Committee. The chancellor sums up the rationale as follows: ‘By virtue of being an independent body of the Treasury the OTS was not always able to weigh up the competing, legitimate objectives and priorities for tax policy that Ministers take into consideration, including delivery, fairness, impact on business and individuals, and costs to taxpayers. It is right to ensure that simplicity of policy and administrative design is brought more directly into policy making in the Treasury and HMRC, with my close oversight, supported by the Financial Secretary.’
Hunt also signals that officials in the Treasury and HMRC have been asked to focus on simplicity in tax policy design, with new policy to undergo ‘increased scrutiny for simplicity of design and ease of customer journey’ with this work feeding into the advice provided to ministers ahead of fiscal events.
While such scrutiny may not have been applied to the current Finance Bill, a cross-party group of MPs, led by Harriett Baldwin (chair of the Treasury Committee) has put forward two amendments to the Bill. The first proposes reversing abolition of the OTS, while the second would require the Treasury to report annually on steps taken to simplify the tax system, in the absence of the OTS.
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