Treasury Committee calls for annual report on tax simplification

The call comes in a report published today on Tax Simplification, which comes ahead of an expected vote on Tuesday on whether the Office of Tax Simplification (OTS) should be abolished.

Members of the committee, led by the chair, Harriett Baldwin, have tabled an amendment (amendment 7) to the Finance Bill seeking to delete the clause abolishing the OTS.

The committee have also tabled a new clause (new clause 2) seeking to put into legislation the report’s recommendation that the Treasury report annually to the committee on tax simplification should the OTS be abolished. (Read our full Finance Bill report stage preview here.)

Conclusions of the report

In today’s report the committee conclude:

• The tax system is overcomplicated. This overcomplication creates compliance burdens, confusion and disincentives to work or grow a business. It is an obstacle to economic dynamism. (Paragraph 8)
• The Chancellor appears to agree with us that the trend of an ever more complicated tax system must be reversed. Disbanding the independent body responsible for advising him on, and championing, tax simplification risks signalling that it is not a priority for the Government. However, the most important factor in securing a simpler tax system in practice would be the Chancellor taking, and acting on, the personal responsibility for simplification that he has pledged. (Paragraph 19)
• The Government’s performance against its stated intention to simplify the tax system must be subject to public scrutiny. As the parliamentary body tasked with considering the performance of the Treasury and HMRC we are a core component of that accountability. (Paragraph 26)

And they recommend:

Should the Government proceed with abolishing the OTS, we recommend they report to the Treasury Committee annually on steps taken to simplify the tax system, covering both new and existing taxes. Such reports should set out performance against tax simplification metrics, compare the complexity of the UK tax system with other countries and set out what the Treasury has done to understand taxpayer needs for tax simplification. (Paragraph 27)

Reaction

Commenting on the report, Harriett Baldwin MP, Chair of the Treasury Committee, said: 

“It’s widely acknowledged – including by the Chancellor – that our tax system is over complicated, confusing and inefficient. It contains numerous cliff edges which disincentivise work, business growth and personal development. 

“Disbanding the office established to champion tax simplification risks signalling the government is not serious about the task at hand. Action needs to be taken, and public scrutiny of government efforts are vital. That’s why we’re calling for the government to report to our committee each year on the success of the Treasury’s tax simplification efforts.” 

In a statement reported in the Financial Times, the Treasury said:

“Tax simplification remains a priority for this government and is considered central to our work, as seen with the recent abolition of the pensions lifetime allowance.”

[CIOT comment to be added shortly]

The proposal for an annual report reflects suggestions made in an article by the CIOT’s Head of External Relations, George Crozier, published as part of a paper by the All Party Parliamentary Group on Anti-Corruption and Responsible Tax in October 2022.

In the article Crozier wrote: “Moving forward is not just about government. In the absence of the OTS Parliament needs to take a closer interest in simplification. A select committee might usefully question ministers and officials, and produce an annual report on progress towards simplification. An annual debate on simplification on the floor of the House would raise the profile of the issue.”

Evidence sessions

In the report the committee draw on evidence provided by witnesses including the Institute for Fiscal Studies at an evidence session on 25 April, as well as a hearing with HMRC on 17 May, one with the Chancellor on 29 March and one with the OTS on 1 March. Some of these sessions were part of the committee’s broader inquiry into tax reliefs, which continues and is expected to lead to a more detailed report in due course.

The committee raised some of these issues briefly in its session earlier this week with the Financial Secretary to the Treasury and others. A report on this session can be read here.