Is the Office for Tax Simplification a success?by
The Treasury is conducting a five year-review of the Office of Tax Simplification, as it is required to do by law. Will anything change, asks Wendy Bradley
The Office of Tax Simplification (OTS) was established in 2010 to advise HMRC on ways it could make the tax system more efficient. The tax think tank was put on a statutory basis in Finance Act 2016 and became an office within the Treasury. As part of that transition it has come up for its first official review, with a 6 July deadline for responses to the government’s call for evidence.
The pattern of five yearly reviews was specified in the legislation, as were its functions. These are to advise the Chancellor, either on request or as OTS considers appropriate, on the simplification of the tax system, covering both legislation and the administration.
There are 12 questions in the call for evidence but they boil down to four areas, discussed below.
Do we need an OTS?
We need to ask ourselves whether tax simplification is really a priority for this government, or indeed for any government at all.
As Einstein may have said, “Everything should be as simple as possible but no simpler.” A government’s priority must surely be to maximise its tax take with the minimum of administrative and political costs. If the money comes in and the complaints aren’t too onerous, why change?
A rambling tax system that gets the job done is preferable in a political sense to an aesthetically perfect system of simple legislation and administrative machinery that causes too much trouble to set up. What government feels secure enough to use up political capital dealing with noisy losers from any tax change? Where, in realpolitik, is the payback?
|Verdict: The government might decide to abolish the OTS, but a more likely outcome is to let it rumble on in the background.|
What do we mean by tax simplification?
The deepest failure of the OTS is its inability to develop a clear consensus of what “tax simplification” actually means.
There have been projects to improve the tax system for years:
- Legislation expressed in simpler language? (Tax law rewrite project)
- Reform tax administration process? (Red tape challenge, Admin burden reduction project)
- Fewer reliefs?
- Better guidance?
- Make tax digital?
Pick your hobby horse and ride it, but is the tax system simpler as a result?
At one point I had a meeting with OTS about whether you could incorporate a simplification metric into the tax impact and information notices (TIINs) for new tax measures. Well of course you could: the TIIN is a construct of HMRC, not an immutable tablet of stone. The question is, what metric could you possibly use? No answers were agreed.
|Verdict: Unless and until there is a clear consensus of what we mean by “tax simplification” and a clear benefit for the government in driving it, the OTS will be a car mascot rather than a crankshaft.|
Who needs to do the job?
Several of the review questions are groping towards this question:
- Do you think the OTS has the right breadth of expertise on its board? If not, what sectors need additional representation and why?
- Given its role as the Chancellor’s independent adviser on tax simplification, do you think the OTS is sufficiently independent from government?
- Does the OTS engage with, and consider the views of, an appropriate number and variety of stakeholders when conducting a review?
This is the heart of the problem: not that the OTS is insufficiently expert, or insufficiently independent from the government, but that it is insufficiently independent from the tax profession.
If you want simplicity, don’t ask an expert!
If the OTS and the government really wanted tax simplification they wouldn’t play around with “quick wins” and 10-man think tanks drawn from the civil service and the tax profession.
A better way
My view is the OTS should be independent of the government. It should be given a budget and a clear mandate, and left to get on with the job.
A fundamental requirement would be to ensure every review the OTS conducts includes a citizen jury or equivalent. Don’t ask people who will argue over how many angels can dance on the head of a pin, but people who will ask why they don’t have a dance floor in the first place.
|Verdict: Time to rearrange the deck chairs by moving a few people on or off the OTS board, but no real appetite for change.|
How will we recognise it when it’s done?
Essentially, the question remains: what do we mean by tax simplification and how will we recognise it when it’s done?
|Verdict: There will be warm words, but no change.|
You may feel I’m unnecessarily cynical. My personal feelings towards the OTS are similar to Winston Churchill’s towards democracy: it is the worst of all possible ways of progressing towards its objective, except for all the others.