Institute urges rethink on scrapping Office of Tax Simplification
If the Government is serious about ‘embedding simplification’ in the UK’s tax policy-making process it should retain the Office of Tax Simplification (OTS) and consider strengthening it, the Chartered Institute of Taxation (CIOT) has told the Chancellor.
In September’s Growth Plan the then-Chancellor Kwasi Kwarteng announced the Government’s intention to abolish the OTS, saying he would instead ‘set a mandate to the Treasury and HMRC to focus on simplifying the tax code’. While some of the measures in the Growth Plan have been reversed by new Chancellor Jeremy Hunt he has so far made no comment on the proposal to scrap the OTS.
Ahead of next month’s Autumn Statement, CIOT President Susan Ball has written to the new Chancellor encouraging him to review the decision to abolish the OTS. In her letter1 she sets out some of the OTS’s achievements to date and argues that having an arms-length body such as the OTS producing detailed analysis and recommendations will be helpful to achieving the aim of embedding simplification in the machinery of government.
In the letter Susan Ball writes:
“The Government’s argument appears to be that it is abolishing the OTS because tax simplification is so important that it wishes to bring it ‘in house’.
“With respect this seems to us a flawed argument. There are a number of reasons why, if the Government are serious about tax simplification, having an arms-length body such as the OTS makes sense, alongside ‘embedding it’ in the machinery of the Treasury and HMRC –
“(1) With the challenges the Treasury and HMRC have had to deal with in recent times2 and delivering against a background of constant tax policy change (even before the last month), it is surely the case that these departments have focuses more central to their work and will (understandably) never prioritise simplification without a structural source of independent challenge. (I note that the OTS itself gave guidance in its recent report on simplification as to how to ‘embed’ it within Treasury/HMRC policy making, so this is clearly not an either/or.)
“(2) The OTS can be a useful way for government to gauge opinion on reform of parts of the tax system, without setting hares running that the government is immediately about to make a particular change. Depending on reaction this can be seen as either helping to prepare the ground for future reform or saving the Government from a policy change they will come to regret.
“(3) The OTS has a very impressive record on effective consultation, reaching out proactively to meet with affected groups around the country to identify burdensome complexity in the tax system. This work will be missed. Do HMRC and the Treasury really have the capacity to take it on?
“(4) The OTS is a crucial interface between HMRC/Treasury and external experts in the private sector, professional bodies and academia. If the tax simplification conversation is conducted entirely in-house without engaging external expertise this risks a retreat into institutional or political group-think, with potentially damaging results.
“If the OTS is felt to have been insufficiently effective so far, there are a range of ways in which it could be strengthened. It could be given a greater role in scrutiny of new proposals. It could take on post-enactment review of new legislation. Reforms such as these would genuinely help embed tax simplification across government.
“In addition, a decision to retain the OTS, especially if it is strengthened, will send out a strong message of the Government’s commitment to simplification, whereas abolishing it sends the opposite message.
“We are in agreement, I think, that simplification of the tax system should be a priority. As well as being too complicated for taxpayers to understand and comply with, the current complexity makes the system harder to digitalise, and more challenging for HMRC to administer effectively.
“In our view the OTS has a key role to play, alongside renewed ministerial commitment and focus from Treasury/HMRC officials, in delivering the ambitious tax simplification programme that the UK needs. With this in mind, we hope that you will review your predecessor’s decision and retain the OTS.”
Notes for editors
1. CIOT President Susan Ball’s letter to the Chancellor Jeremy Hunt is here.
2. HMRC has been under pressure in recent years for many reasons, including Brexit and the impact of the pandemic. In June 2022 the CIOT, along with other professional bodies including the Association of Taxation Technicians, wrote a joint letter to HMRC to express their and their members’ concerns regarding HMRC’s poor service levels – see here.
3. HMRC monthly performance report: June 2022 - GOV.UK (www.gov.uk)
4. HMRC quarterly performance updates - GOV.UK (www.gov.uk)
5. The OTS gives independent advice to the Government on simplifying the UK tax system, to make things easier for taxpayers. The OTS was set up in 2010 and made a permanent independent Office of the Treasury in 2015. It was later placed on a statutory basis. The OTS offers recommendations and advice to the Chancellor about how to make the UK tax system simpler, not least for individuals and smaller businesses. The OTS board is led by an independent Chair and Tax Director, and has up to eight further members, supported by a team drawn from the civil service and the private sector.