Paul Morton on the real challenge of tax simplification
Paul Morton reflects on his time as Tax Director at the Office of Tax Simplification, suggesting that non-tax professionals and ordinary taxpayers should have more of an influence on the OTS‚ work.
One of the great pleasures of working in the tax profession is the opportunity to work with such nice people! Every field of activity attracts certain kinds of personality more than others and the tax community is filled with intelligent people who enjoy a puzzle, who like to find answers and who generally work together in a collaborative and congenial way. But perhaps more than that, the tax world is full of experts. Everyone is an expert in their area of tax.
There is one disadvantage to being an expert, which comes to the fore in tax simplification. An expert generally forgets what it was like to not be an expert! Those who deal with tax returns every day are no longer scared by them. Those who work with complex computations are perfectly able to work through the intricacies of their own tax position (I hope). However, when it comes to improving the experience of members of the public, we really need to understand what it feels like to someone who has no familiarity or expertise with tax. And the only person who can share that with us is someone who has no familiarity or expertise with tax.
It is quite striking how often, during my time at the Office of Tax Simplification (OTS), we might, for example, meet an expert to discuss capital allowances and find ourselves drifting into their personal experience with inheritance tax. That personal experience might be just as enlightening as their expert view in their specialist subject, precisely because it is effectively the view of a member of the public in relation to that other tax.
A core objective of the OTS is to have a positive impact on the experience of the greatest number of people on the largest number of occasions. This means simplifying the tax experience for the wider public rather than focussing on abstruse areas of tax legislation. In order to achieve this the OTS, and in a broader sense HMRC and the Treasury, need to hear more from those who are not experts in tax. Perhaps the entire tax community can help by sharing every day, non-expert, experiences of tax complexity. Indeed, it may be those moments of frustration in dealing with personal or family tax affairs that provide the most useful insights!
More than 10,000 tax returns were filed on Christmas Day and Boxing Day last year. Two hundred and four tax returns were filed between midnight on Christmas Eve and 8.00am on Christmas Day! Perhaps Father Christmas‚ s Elves had finished their packing duties at that point and had a few spare hours. Why were so many people filing over Christmas?
More importantly, HMRC reported that 700,000 tax returns were submitted on 31st January, the final day to avoid a penalty. Why do so many people leave it to the last moment? Is it because the task of completing a tax return is so difficult that it feels unpleasant? There are some on-line activities that people enjoy. What could be done to make the process of completing a tax return more enjoyable? Would this encourage people to start earlier?
Most people benefit from some encouragement when tackling something difficult. A bystander saying ‚ well done‚ can be quite invigorating and athletes perform better to a cheering crowd than to a silent stadium. Perhaps the online systems can provide some encouragement? How would we feel if the self-assessment software reported back to us:
‚ thank you ‚ you have now completed part X of your return. Good job! Keep up the good work‚ .‚
Well, perhaps a more promising line would be to offer real time hints and tips. If someone reports self-employment income the system could ask for a description of the source of income and then add:
‚ Did you know that many people in your profession claim the costs of ‚ .?‚
‚ Do you work at more than one location?‚
‚ Answer: no‚ .
‚ You seem to have claimed travel expenses but do remember that the costs of travelling from home to your usual place of work are not generally deductible...‚
And would these comments work well in purely written form or would people respond better, or worse, if spoken to by the computer? Many of us have become accustomed to being spoken to by satnav devices and lifts.
At the OTS, we have seen some very interesting work on new ways of presenting financial information to the wider public. For example, one firm is using a variety of visual techniques to present pension information to members of pension schemes. People find it quite difficult to appreciate the impact of compounding on pension savings but presenting information about contributions and growth in a more visual way can be very effective. For example, watching buildings grow in a short video clip can help to bring the raw numbers to life. A scarier approach was to use virtual reality to present saving for a pension as a walk across a narrow bridge between tall buildings. With sufficient saving the scheme member can safely reach the other side. If not, the precipice awaits! Of course, the objective is to help people feel more comfortable with their tax compliance rather than the opposite so this latter may not be quite the approach to adopt with self-assessment.
HMRC is devoting a great deal of effort to behavioural aspects of online interactions and doing some marvellous work in improving the experience. Once again, feedback from members of the public, or experts acting outside their area of expertise, is likely to be helpful. Perhaps in the future there will be a place for behavioural scientists at the OTS, or even members of the public! Certainly, there is a place for more imaginative ways of presenting the experience of dealing with tax.
By Paul Morton, former Tax Director of the Office of Tax Simplification. Prior to that he was Tax Director for RELX Group plc (formerly Reed Elsevier), the global information and analytics group, for 12 years.