MPs criticise £100bn tax relief system
The UK's 1,000-plus tax reliefs are confusing and help people avoid or evade tax, the Public Accounts Committee (PAC) has said.
There are 1,128 different tax reliefs in the UK, creating a very complex tax system, according to a new report by the PAC.
The government spends £100bn every year on reliefs designed to promote jobs and growth, or investment in the arts. "Whilst well-intentioned, every one of these tax reliefs creates opportunities for avoidance and evasion," said Margaret Hodge, chair of the committee of MPs.
She gave the example of how film tax relief has been exploited by tax avoidance schemes.
The government has tried to simplify the tax system but so far it has only abolished 43 tax reliefs and another 134 have been introduced since 2011, the PAC said.
The committee said much more radical simplification of the tax system is required to "to get to grips with aggressive tax avoidance".
But some accountants, such as members of the UK 200 Group of independent accountancy and law firms, said tax reliefs are useful and aren't easy to scrap.
“The personal allowance is a tax relief. Does Margaret Hodge have a problem with that relief," said Paul Short, partner, at Lambert Chapman. "Where do you draw the line?"
David Whiscombe, director of tax at Berg Kaprow Lewis, said simple tax system is probably be less fair than a more complex one with more tax relief.
“You can have a simple tax system; but a simple tax system will involve some 'rough justice'," he said. "So you can add all manner of reliefs to make the system fairer. But you will no longer have a simple tax system. And if you are determined to use the tax system as an instrument of policy to encourage certain behaviours and discourage others you complicate it further. So you first have to have an intelligent debate about what sort of tax system you want. A simple one? A fair one?"