Politicians don’t understand the tax system and aren’t in post long enough to learn about it, but the Office of Tax Simplification may have the answer, says Robert Bruce
This article was first published in the September 2019 UK edition of Accounting and Business magazine.
There is a complete disconnection between the arguments around tax policy and the raising of revenue. No one doubts that the tax system is way too complex, but few do anything about how tax is raised.
In early July, the chair of the House of Commons procedure committee called for a new committee, a budget committee, to be set up. The reason, he said, was simple: there are a plethora of systems to scrutinise how taxpayers’ money has been spent, but they come into play only after the horses have bolted. Parliament pays hardly any attention to spending plans at the outset. As the committee chair Charles Walker said: ‘MPs have, in the past week, signed off the spending of over £300bn of taxpayers’ money with a cursory amount of scrutiny.’
This, it must be said, has always been the case. And there are many reasons. The number of MPs who understand tax policy, let alone the technical detail, can probably be counted on the fingers of two hands. It is easier for them to assume that all will be well and then nod tax proposals through – hence the idea of having a budget committee to take a look at the ideas before the juggernaut actually starts moving.
The tax process should be simple. It is about deciding how much revenue the public finances need and then setting about the simplest way of raising it. But the real problem is that of understanding. It is impossibly hard to decide what ought to be done if hardly anyone has a clue what is going on. So the need is for understanding as much as it is about the detail.
There is no shortage of ideas. But at times there just seems to be a shortage of good sense. And the parliamentary systems and the politicians who drive the tax regime can make it worse. They are tied to the legislative mistakes of the past. There are a few short years between elections. They need to invent or change something. They do so. They bask in approbation. Then the implications, the effects, or the unintended consequences of the measures are realised. And then there is a fight to reform the measure. Think business rates. It is a depressing cycle.
The answer needs to be practical and knee-deep in much good sense. And that is where the Office of Tax Simplification comes in. Set up almost a decade ago, it is an independent office of the Treasury that became a statutory body in 2016, so it is hard to ignore. It is there to provide ways in which the tax system could be simplified. But it is not really about clearing the overgrown undergrowth. It is about providing evidence-based information that will persuade politicians to bring about change.
For Kathryn Cearns, recently appointed chair, it is a simple equation to bring the three sides – taxpayers, tax gatherer and politicians – together in something approaching harmony. The objective is to produce positive change. ‘We need to keep the interaction between the taxpayers and the system as straightforward as possible,’ she says. If we can manage that, then reforms and change will flow. ‘The more taxpayers understand the system, the more likely they are to comply on time,’ she adds. ‘It would be more efficient for HMRC as well. It is a partnership.’
There is a mass of information out there. It is a question of making it clear and influential. ‘We need to look at how our proposals work,’ she says, ‘and whether they work out as we expected. It is not just about tax technical issues, but about how people react. It is incumbent on us to make HMRC evidence on this more visible. If people have evidence of what has happened, then they can avoid the pitfalls. We need a broader understanding about what works and what does not.’
Likewise the politicians. ‘We have to produce reports that really address the issues so politicians can put them into action,’ Cearns says. ‘We need to work together.’ It is a simple strategy, but one that should work.
Robert Bruce is an accountancy commentator and journalist.
"There is no shortage of revenue-raising ideas. But at times there just seems to be a shortage of good sense"