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OTS makes last stand in Treasury Committee meeting

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As the book ostensibly closes on the Office of Tax Simplification, Bill Dodwell and Kathryn Cearns sought to defend their track record while warning against the body’s dissolution during questioning by the Treasury Committee.

2nd Mar 2023
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In a Treasury Committee meeting during the last days of the Office of Tax Simplification (OTS), it seemed that the moribund advisory office was planning on going down swinging, as tax director Bill Dodwell and chair Kathryn Cearns offered evidence to MPs.

In what was described by the panel as an “open and honest” affair, the OTS representatives were candid in their responses to MPs, with Dodwell being particularly outspoken in the face of his office facing the chop.

“I still don’t know why Kwasi Kwarteng made that announcement. I can see no reason why the office should be closed. I think that the government and future governments will miss some of the attributes of the office,” Dodwell said.

Advisory only

A sticking point for some on the committee was the tax department’s supposed lack of achievements in the 13 years since its inception under George Osborne. Conservative member Andrea Leadsom, while surprisingly stating that she would vote against the dissolution of the office, questioned the OTS’s track record asking: “Why is it that over the last 12, nearly 13 years, you’ve not focused on some major eye-catching things that will really transform tax simplification? Because that’s what the country was calling for.”

“I think the question really is why have Chancellors not been able [to make changes]?” Dodwell replied.

Cearns too felt that the charges levelled at the OTS by committee members were unfair, arguing that the advisory nature of the office meant that they were not a “lobbying organisation”.

“I just think I should be very clear here. We do not simplify the tax system ourselves. We advise as to what we think would be good to simplify,” Cearns added. 

When asked whether the tax code was simpler than it was in 2010, Dodwell said, “Simply put, the tax code is now longer and more complicated,” taking aim at the successive governments.

“The principal reason [for the increase] is the new taxes introduced by the governments we’ve had since 2010. The Charter Institute of Tax calculated that in the last 20 years, we’ve had on average one new tax every year.”

A successful tenure?

Arguing that the lack of publicising of their achievements was a factor in the office’s closure, committee members asked Dodwell and Cearns to recount some of the successes since the OTS’s inception. 

Dodwell began by citing the cash basis, which he believed was a “huge success” for freelancers, as well as the OTS’s work on HMRC guidance as major success stories for the department.

However, while other smaller victories, such as changes to inheritance tax, were mentioned, Dodwell felt the OTS’s work was frustrated due to the fact that successive governments had not taken on their advice, noting: “You can look and see the reports that hadn’t really been taken up.”

Looking forward, Cearns talked of plans that would have been put into place if the OTS was saved from dissolution saying: “One of the areas that we could have looked at and advised on in more detail would be more of the cross-cutting work that we did on things like digitalisation of the tax system, and how that interfaces with taxpayers and businesses.” 

A controversial decision

The closure of the OTS has remained a bone of contention since Kwarteng’s announcement back in September, with various industry voices calling for a reversal of the controversial decision.

In the run-up to last year’s Autumn Statement, CIOT president Susan Ball argued that the closure of the OTS in order to bring it in-house was a “flawed argument”.

“Almost every Finance Act of the past decade has had measures in it which owe their genesis to the OTS, and which have made navigating the tax system easier for one group or another,” Ball said.

In the aftermath of the committee meeting, former OTS board member and Oxford Emeritus Professor of Taxation Law and Policy, Judith Freedman remained hopeful that, after proving their usefulness to MPs, the OTS could be saved from the chopping block.

Whether the Exchequer decides to reverse the decision to subsume the OTS will be revealed in the Finance Bill during the Spring Budget. However, by the end of the meeting the committee seemed swayed by the arguments put forward by Dodwell and Cearns, with MPs committing to writing to the Chancellor, as well as asking the OTS to write up a “top 10 list” of things that will be missed if it were to be disbanded. 

Jeremy Hunt may yet still reverse his predecessor’s controversial changes. However, the OTS made their opinions clear as to what they hope will happen come 15 March, with Dodwell saying: “I think the government and the country will be better off if it retains us than if it abolishes us. We’re not an expensive body, and I think we’ve done good work.”

Replies (5)

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By Hugo Fair
02nd Mar 2023 15:22

IMHO the thing that everyone fails to realise about the OTS is/was that it did something for HMRC (or strictly speaking the Chancellor) that any sane organisation (but not HMRC) would do for itself
... invite in a mix of experts and practitioners (for each topic being put under the microscope) and *really* listen to them.
And not just listen (like PAC) but actively engage by keeping up a 2-way conversation with participants all the way through to report publication (including open access to draft versions).

Their one weakness is, like so many almost academic bodies, a lack of self promotion (which might be just because it's not part of their remit to stray outside of direct recommendations to their pay master).

It would indeed be interesting if someone did a proper analysis of their reports.
Not just the reports that weren't "really taken up", but the individual elements that were rejected (and yet sometimes implemented some years later) ... or were accepted but not then actually implemented (partially or wholly) ... or were simply ignored/deep-frozen.

I suspect they were the inverse of HMRC's "power without accountability"!

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Morph
By kevinringer
03rd Mar 2023 11:33

The OTS has existed for 13 years. During that time, tax has become significantly more complex, not simpler eg HICB tax charge, MTD, 30/60-day CGT. And there is more complexity on its way eg basis period reform. There is no doubt that tax in 2023 is much more complex than 2010. This can be proved by comparing HMRC's 2010 SA110Notes which in 2010 was 38 pages compared to 53 pages 2022. That's an increase of 40%. This is because of devolved taxes, changes to how dividends and savings are taxed etc.

I appreciate that it is politicians that introduce complexity but given the massive increase in complexity that has occurred, does this raise questions as to how effective the OTS has been? Could it be that tax would be even more complex if the OTS had not existed?

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By Justin Bryant
03rd Mar 2023 13:02

You can equally blame JH for not reversing this. See: https://www.tax.org.uk/tax-director-questions-decision-to-close-ots

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By twohaporth
04th Mar 2023 10:52

I can't say that I think they have been very helpful. Tax is far more complicated than it was or needs to be. If they have been clever but ignored then they haven't done their job - they should have shouted to ensure that they were heard rather than carrying on accepting their salaries like good civil servants and being not a lot of use, like good civil servants. And they wonder why taxes are high and productivity is low. I mean look at all the time wasted trying to talk to HMRC - loss of productivity for those of us who have to work to protect our clients - and the numpties in 'Government' express surprise that productivity is down. Hours spent piddling around with GDPR regs AML regs and the rest of the bureaucratic cr*p dreamt up by the time wasters in Government isn't going to get the economy moving - nor is putting up taxes going to get people back to work. Hunt certainly has a problem with his nomenclature.

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By dmmarler
04th Mar 2023 11:55

When it was first set up the OTS told my colleague and I it was to look at IR35, and there was the implication it could only make recommendations if it could show savings as a result. There is a dichotemy here - civil servants need to have taxes as complicated as possible to keep them in employment ..... The employment costs of HMRC (pay, pensions, estates, computer kit, software, etc.) are vast. Simplification of taxes is the last thing they would want. OTS was never going to succeed.
What do we have? Increasingly complex taxes and more civil servants; business overburdened with unnecessary administration; loss of productivity, etc.
We need a chancellor who understands business and taxes and tells the Treasury to put its house in order and stop the pointless gravy train. What about one rate of tax for everything? One personal allowance for everyone (eg same as 35 hours at minimum wage)? No capital allowances, etc. No NI for anyone. Just strip everything away to the bare minimum. We could then focus our accounting/financial talents on helping businesses improve their profits.

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