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?"

Comments
Time for change's picture

It must be 1 April. There I was thinking..........

Time for change | | Permalink

that politicians were responsible for all our Tax law?

If it needs simplification and, in my opinion, it does, who would do it? Politicians of course.

You couldn't make up this c*** could you?

BKD's picture

Hmmm ...

BKD | | Permalink

I must be slipping up.

I cannot find a single definition of spends.....    1 thanks

mackthefork | | Permalink

"The government spends £100bn every year on reliefs designed to promote jobs and growth, or investment in the arts."

Which makes this statement accurate.  If this ends up catching on I will email OED and ask them to cvonsider making 'not taking something from people, with menaces, that you have no legal right to' a new definition of spending.

Regards

MtF

 

That's what happens ...

vstrad | | Permalink

... when you use the tax system as a tool for social engineering instead of as a mechanism for raising money.

should_be_working's picture

People in not paying tax shocker    2 thanks

should_be_working | | Permalink

So people are using reliefs for tax avoidance and evasion eh? Oh the humanity!

1. If they're using them for avoidance, isn't that the bl**ming point of them? The reliefs are there to influence taxpayer behaviour through the incentive of a lower tax liability, If not that, then they're in place to reflect an economic reality, so then it's hardly avoidance.

2. Avoidance and evasion are not the same, stop using then in the same sentence please Mrs Hodge.

3. How can using a relief ever be 'evasion' anyway - are are they referring to the resultant complications leaving evasion difficult to detect and/or easier to do?

4 She (for this is Margaret 'The Dodge' Hodge) is saying 'avoidance' like its a bad thing!?!

 

As a better expert than

John MacDonald | | Permalink

As a better expert than myself stated in the article, you must choose between a simple tax system or a fair tax system - you cannot have it both ways. I vote for a simple tax system - what does fair mean anyway? Fairness is entirely subjective.

Tax and Social Engineering

chatman | | Permalink

Sniper Cat wrote:
Surely tax ... should not be used for social engineering

Why not? It has been shown that tax on cigarettes decreases smoking. I think that is a good thing; not ideal, as it puts a greater burden, relatively, on the poor, but overall, good.

If

The Black Knight | | Permalink

If MS Hodge does not know the difference between evasion and avoidance then why is she in charge of the idiots committee. Is she really fit for purpose? Surely we don't need an Ann Robinson imitation. (She is isn't she? Only without the plastic/bottox look)

If you simplify tax, evasion will increase. SIMPLES

Yes the complications and film tax relief has been used in avoidance schemes but this seems to have been nullified in that they did not work where customs could be bothered to collect.

That is how Self assessment works, claim what you want and HMRC check. Only they don't know what to check LOL

IF you leave the gate open you can hardly blame the sheep from escaping. Honestly sometimes you wonder how the human race got this far. Perhaps that's the best evidence for the existence of God yet.

Must be Monday...

Ian McTernan CTA | | Permalink

Another totally useless soundbite from the 'grab the limelight once a week' PAC.

She didn't say 'they create opportunities for encouraging spending on research, investment and growth' as that would be admitting that some of them are actually useful and introduced by this Government.

Instead yet another negative with no suggestions as to how to fix the problem, or even what the overall effect of the 'problem' is.

Saying '100bn tax reliefs' implies that they are all used to evade tax.  It's a bit like saying 'rain damages crops causing 2bn loss of food' and suggesting we should ban rain.